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Employee Benefits Law Report Reporting on recent trends and developments affecting employee benefits

Tag Archives: Rev. Rul. 2019-19

Code Section 162(m) Guidance Issued Regarding Deductibility of Dividends and Dividend Equivalents in Equity Awards

Posted in Executive Compensation, Fringe Benefits

The IRS recently issued an important ruling on whether dividends and dividend equivalents related to restricted stock and restricted stock units (“RSUs”) can be treated as performance-based compensation for purposes of Code Section 162(m). In Rev. Rul. 2012-19, 2012-28 IRB, the IRS held that such dividends and dividend equivalents would qualify as performance-based compensation, provided that each of them separately satisfy Code Section 162(m)’s performance-based compensation requirements. In contrast, if dividends and dividend equivalents were paid to employees at the same time as dividends on common stock were paid to shareholders, regardless of whether the underlying awards were vested, …