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

Tag Archives: Section 162(m)

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, …


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Public Companies May Need to Amend Stock Option Plans Soon to Qualify for Exception to $1 Million Compensation Deduction Limit

Posted in Executive Compensation

Publicly traded companies may need to act quickly to review, and, if necessary, amend their stock option and stock appreciation right (“SAR”) plans in order to preserve tax deductions for compensation in excess of $1 million paid to certain executives. The reason for this review is that the Internal Revenue Service (the “IRS”) and the United States Treasury Department recently issued proposed regulations that clarify a few items with respect to the application of Section 162(m) of the Internal Revenue Code (the “Code”) to such plans. One item relates to requirements that stock options and SARs must meet to qualify …


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