409A Applicable Law - From Code to Regs to IRS Notices
(look below this table for new developments)
|Regulations||Preamble with Final Regs |
2016.06.22Proposed Regs (miscellaneous clarifications and income inclusion)
|Gov't Notices ||Reporting and Withholding Rules: Notice 2008-115 |
409A Developments (see "Litigation" and "Severance" separately below):
2016.06.22 409A Proposed Regs Released - Many Clarifications. The IRS release begins with a list of 19 clarifications being made, with a few of the notable changes being described in the following quotations from the IRS proposal:
2015.Sept.20 Section 409A Corrections to Employment Agreements - Time for an Ounce of Protection in The Year BEFORE Vesting (or Severance)
2013.Nov.23 "Legally binding Rights" Tax Ruling for Bonus Deductions . . . 409A? In Field Attorney Advice dated 10/25/13, the IRS cites extensive authority for its position that legally binding rights do not exist when an employer has reserved to itself the unilateral right to reduce or eliminate bonus awards prior to making payments. While focused on when tax deductions are allowable, the memo has interesting implications under Code §409A because Treas. Reg. §1.409A-1(b)(1) provides that legally binding rights may arise -- despite an employer's reservation of rights to reduce awards -- if facts and circumstances indicate that those rights "lack substantive significance." In the absence of employer actions undermining its discretion to reduce or eliminate bonuses or other awards, the IRS Field Attorney Advice Memo is significant because it provides solid authority on which to argue that an employer's reservation of rights makes Code §409A totally inapplicable.
2013.Nov.19 Treasury Release of 409A Income Inclusion (Penalty) Rules: Expected Mid-2014. Treasury's deputy benefits tax counsel Robert J. Neis stated that a key feature of its 2013-14 guidance plan includes issuing final penalty regulations under Code §409A.Litigation
2013.Mar.06 Over $5 Million of Option Gain subject to 409A Penalties due to Below-Market Option Price. In Sutardja v U.S., the Court of Federal Claims refused a taxpayer's summary judgment motion seeking a refund of 409A penalties paid with respect to more than $5 million of income arising from the taxpayer's exercise of stock options in 2006. The court rejected arguments to the effect that 409A cannot apply to stock options, and in the process held that Notice 2005-1 provided a reasonable basis for the imposition of 409A taxes if the exercise price for the stock options is ultimately found to have been below the fair market value of the underlying shares on the grant date.
Severance from Employment
Substantial Risk of Forfeiture
Substitutions - of New Benefits for 409A Benefits
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