By Dave Tumen and Greg Daugherty on At long last, the Department of the Treasury and Internal Revenue Service published final regulations to explain how changes to Internal Revenue Code Section 162(m) under the Tax Cuts and Jobs Act of 2017 (TCJA) affect the deductibility (or lack thereof) of compensation in excess of $1 million paid to covered employees. We have blogged … Continue Reading
By Greg Daugherty, Dave Tumen and Rich Helmreich on Unintended consequences are a fact of life. As one of many examples, after the Titanic sank, the United States enacted a law that required any American ship carrying over 100 tons of weight to have enough lifeboats for every passenger. It was a noble thought – no more rationing of lifeboats in the event of … Continue Reading
By Greg Daugherty on The IRS recently issued Notice 2019-09 (Notice), which provides guidance with respect to the 21 percent excise tax on remuneration in excess of $1 million and excess parachute payments by “applicable tax exempt organizations” (ATEOs) applies under Code Section 4960. In general Code Section 4960 and the Notice apply concepts from Code Sections 162(m) (which … Continue Reading
By Greg Daugherty and Dave Tumen on We previously blogged about how the Tax Cuts and Jobs Act (the Act) amended Internal Revenue Code Section 162(m). In general, the amended Code Section 162(m) restricts the ability of publicly traded companies to recognize a tax deduction for amounts paid to “covered employees” in excess of $1 million. It does this primarily by expanding … Continue Reading
By Greg Daugherty and Dave Tumen on While opinions on the Tax Cuts and Jobs Act vary, one thing everyone can agree on is that it is a game changer in many areas of law and business. We explain this change and outline what it could mean for public companies in our recent post over at our firm’s Banking & Finance Law Report … Continue Reading
By Greg Daugherty and Dave Tumen on A week after telling everyone to “relax” about the proposed executive compensation changes in the Tax Cuts and Jobs Act, we have to admit that we have been watching anxiously as the proposed bills move through the legislative process. The executive compensation items that we discussed last week have experienced quite a journey in the … Continue Reading
By Greg Daugherty and Dave Tumen on Three games into the 2014 National Football League season, the Green Bay Packers had a 1-2 record. Fans were panicking. Many were questioning whether the Packers and its quarterback, Aaron Rodgers, were doomed to have a bad season. Rodgers responded with a simple message for fans: “R-E-L-A-X”. The Packers redoubled their efforts and made the … Continue Reading
By Greg Daugherty on Ever since the series finale of “Mad Men,” I’ve been thinking a lot about old commercials. One commercial in particular involves Heinz ketchup. In the ad, someone would turn the bottle upside down, and the ketchup would take an extremely long time to pour out of the bottle and onto a sandwich. An announcer would … Continue Reading
By Greg Daugherty on The IRS recently released an audit techniques guide (the “Guide”) to advise its internal auditors who are examining cases involving equity-based compensation (i.e., compensation based on the value of specified stock). Examples include stock transfers, stock options, stock warrants, restricted stock, restricted stock units, phantom stock plans and stock appreciation rights paid to an employee, … Continue Reading
By Greg Daugherty on The IRS and Treasury Department recently issued final regulations under Code Section 162(m) that, as the IRS describes it, “clarifies” stock and equity-based compensation plan drafting issues. Of course, whether something represents a clarification or a substantive change lies in the eye of the beholder (particularly if that beholder is a politician or regulator in … Continue Reading
By Greg Daugherty on Clients frequently ask us if severance payments are subject to tax withholding. The answer is that they clearly are subject to income tax withholding, but there has always been some ambiguity about the circumstances in which they are subject to FICA tax withholding. The IRS has always taken the position that severance payments are not subject to … Continue Reading
By Greg Daugherty and Ned Segelken on Recently, we published an article in Bloomberg BNA’s Pension & Benefits DailyTM that provides context for understanding the proposed Tax Reform Act of 2014’s penalties on excessive executive compensation for tax-exempt organizations and offers our thoughts about planning opportunities for the future. This is available for our readers at this link.… Continue Reading
By Porter Wright on If you are a board member or senior executive of a company that is rapidly failing, what do you about employee benefits? No one has ever liked my answer: freeze the benefits. This is counterintuitive advice for someone who is trying to keep the company afloat, and who would be personally affected by the loss of benefits. But let me explain why this is so important, using a complaint that was recently filed by the DOL, and the facts as they were alleged.… Continue Reading
By Greg Daugherty on On our companion blog — Federal Securities Law Blog – Andrew Trafford describes the Securities and Exchange Commission’s recently proposed CEO pay ratio rule. This rule comes from Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act. In a nutshell, this rule generally requires public companies to disclose in their proxy statements the ratio of the compensation (as defined in Item 402(c)(2)(x) of Regulation S-K) of the median-compensated employee in the company to the compensation of the company’s CEO.
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By Greg Daugherty on Because of the pending fiscal cliff and the possibility of higher tax rates coming in 2013, we have been asked if private company employers should accelerate payments of incentive compensation into 2012, rather than pay them in 2013. This strategy may sound tempting to executives given all of the headlines of the fiscal cliff and potentially higher tax rates on high-wage earners. Still, a lot can happen between now and December 31st. … Continue Reading
By Porter Wright on This past May, we reported that the Ohio Supreme Court ruled in Acordia of Ohio, L.L.C. v. Fishel that following a merger, the surviving company may not be able to enforce employees’ non-compete agreements, where the agreements failed to contain an assignment clause, and the time period of the employees’ non-competes began to run as of the date of the merger. The Court reconsidered its decision, and issued a new decision today. … Continue Reading
By Greg Daugherty on 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).… Continue Reading
By Porter Wright on As discussed in our sister blog – Employer Law Report – the Ohio Supreme Court has ruled in a 4-3 decision that following a merger, the surviving company may not be able to enforce employees' non-compete agreements where the agreements fail to obtain an assignment clause, and the time period of the employees' non-competes began to run as of the date of the merger.… Continue Reading
By Porter Wright on A recent Sixth Circuit decision provides a tutorial on designing and administering an ERISA executive compensation top-hat plan. In Daft v. Advest, Inc., a U.S. Court of Appeals for the Sixth Circuit reversed the District Court’s decision that the executive compensation plan was an ERISA plan but was not a top-hat plan, on the grounds … Continue Reading
By Greg Daugherty on In our recent blog about public equity compensation arrangements, we noted inconsistencies regarding the effective date of new guidance. The IRS and Treasury subsequently corrected the 162(m) guidance, and based upon this correction, we reaffirm that public companies need to review their equity compensation arrangements as soon as possible to minimize potential negative tax ramifications. Public Companies … Continue Reading
By Greg Daugherty on 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 … Continue Reading
By Greg Daugherty on Executives are at risk of early income inclusion, a 20% penalty tax, and interest charges if their compensation arrangements violate the evolving guidance under Internal Revenue Code Section 409A, which means that it is important to periodically review these arrangements. If you have not already done so, you should review your executive compensation arrangements in … Continue Reading
