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Category Archives: Executive Compensation

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BlueCrest – the Upper Tribunal considers the salaried member rules

The Upper Tribunal (UT) has upheld the decision of the First‑tier Tribunal (FTT) regarding the application of the UK’s salaried member rules (the Rules) to certain members of BlueCrest Capital Management (UK) LLP (BlueCrest), an asset manager engaged in the provision of hedge fund management services. We previously reported on the FTT decision in June … Continue Reading

Regulations on Executive Compensation Excise Tax (Section 4960) for Tax-Exempt Employer and Their Affiliates Finalized

Employers that are tax-exempt or have tax-exempt affiliates (for example, a foundation) should pay close attention to a 21% excise tax under Section 4960 of the Internal Revenue Code on certain executive compensation.  Final Regulations under Section 4960 are described here.  The discussion includes traps for the unwary.  Please reach out to your Proskauer contact … Continue Reading

SEC Continues to Scrutinize Disclosure of Perks and Personal Benefits

Over the past few months, the Securities and Exchange Commission (the “SEC”) has imposed civil penalties in the hundreds of thousands of dollars against multiple publicly traded corporations in connection with their failure to disclosure certain perquisites and personal benefits provided to senior executive officers, including travel, lodging and entertainment fringes and expenses.… Continue Reading

10 Keys to Proposed Regulations Under Section 4960 (Executive Compensation for Tax-Exempt Organizations and their Affiliates)

Employers that are tax-exempt or have tax-exempt affiliates (for example, a foundation) should pay close attention to a 21% excise tax under Section 4960 of the Internal Revenue Code on certain executive compensation.  Proposed Regulations under Section 4960 are described here.  The discussion includes traps for the unwary.  Please reach out to your Proskauer contact … Continue Reading

COVID-19 Impact on Executive Compensation – Amending Performance Goals under Equity and Other Incentive Awards

We continue our blog series on COVID-19 implications on executive compensation matters with a post that addresses considerations relating to amending performance goals under equity and other incentive awards. Setting meaningful and effective performance goals often requires significant focus and analysis by compensation committees with the assistance of their advisors and management.  In light of … Continue Reading

The CARES Act and Compensation – What Employers Need to Know

On March 27, 2020, the President signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) (H.R. 748). In this blog post we (1) lay out an initial action plan for employers considering obtaining relief under the CARES Act, (2) summarize the compensation-related provisions of the CARES Act, and (3) identify … Continue Reading

COVID-19 Impact on Executive Compensation – Salary/Wage Reductions

We continue our blog series on COVID-19 implications on executive compensation matters with a post that addresses salary or wage reductions on a company-wide or targeted basis. Companies impacted by the COVID-19 pandemic, including the concomitant widespread shelter in place orders, may be considering pay cuts for some or all of their workforce, either in … Continue Reading

COVID-19 Impact on Executive Compensation (Leave of Absence)

COVID-19 has had significant impacts on all aspects of business.  While employers are assessing how to handle immediate employee needs related to sick leave, family leave and benefits claims, employers should also consider the impact that changes in their workforce or economic conditions will have on their compensation plans and programs. This blog post addresses … Continue Reading

Sun Capital Update: First Circuit Finds Private Equity Funds Not Liable for Portfolio Company’s Pension Liabilities

First Circuit reverses District Court’s decision that co-investing funds were in de facto partnership which controlled portfolio company and could be held liable for portfolio company’s withdrawal liability; decision may be significant for multiemployer pension funds and private investment funds. Read the full alert.… Continue Reading

IRS Issues Limited Section 409A Relief to Pay Income Taxes on Pre-2009 Section 457A Deferrals

The Internal Revenue Service (the “IRS”) has issued Notice 2017-75 (the “Notice”), which provides certain limited relief from the strict requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), in order to pay income taxes on deferrals attributable to services performed before 2009 that are required to be included … Continue Reading

House of Representatives and Senate Conferees Reach Agreement on the Tax Cuts and Jobs Act (H.R. 1): Description of the Conference Agreement and Differences from House and Senate Versions

On Friday, December 15, the U.S. House of Representative and Senate conferees reached agreement on the Tax Cuts and Jobs Act (H.R. 1) (the “Final Bill”), and released legislative text, an explanation, and the Joint Committee on Taxation estimated budget effects (commonly referred to as the “score”).  Next week the House and Senate are each … Continue Reading

To Accelerate or Not? Potential Tax Planning in Light of Proposed Reforms to Code Section 162(m)

Under both the House and Senate versions of the Tax Cuts and Jobs Act, Internal Revenue Code Section 162(m) would be modified to expand the scope of companies and executive officers subject to the limitation on deductibility of compensation over $1 million, as well as to eliminate the exception to non-deductibility under Section 162(m) for … Continue Reading

U.S. Senate Passes Its Version of the Tax Cuts and Jobs Act (H.R. 1); Descriptions of the Bills Passed in the House and Senate and Outstanding Differences to be Resolved in Conference

In the early hours of Saturday morning, the U.S. Senate passed the Tax Cuts and Jobs Act (H.R. 1) (the “Senate bill”), just over two weeks after the U.S. House of Representatives passed its own version of the same legislation (the “House bill”).  Members of the House and Senate will next convene in conference to … Continue Reading

Comparison of the Executive Compensation Provisions in the Tax Cuts and Jobs Act

On December 2, 2017, the Senate approved its version of the Tax Cuts and Jobs Act, which contains proposals modifying certain executive compensation provisions of the Internal Revenue Code. The Senate’s approval of the executive compensation provisions follows substantively the same provisions proposed by the Senate Finance Committee’s bill, and the House of Representatives’ version … Continue Reading

House of Representatives Passes the Tax Cuts and Jobs Act (H.R. 1); Senate Finance Committee Approves Modified Version; Comparison of the Bill Passed by the House and the Modified Senate Bill

Yesterday afternoon, the House of Representatives passed the Tax Cuts and Jobs Act (H.R. 1) (the “House bill”). The House bill is identical to the draft bill approved by the House Ways and Means Committee on November 10. Late last night the Senate Finance Committee approved its own conceptual version of the Tax Cuts and … Continue Reading

SEC Adopts Additional Guidance on CEO Pay Ratio Rule

On September 21, 2017, the Securities and Exchange Commission (the “SEC”) adopted interpretive guidance regarding Item 402(u) of Regulation S-K, which governs pay ratio disclosure. The interpretive guidance is intended to provide assistance to companies choosing to use statistical sampling in determining their median employee. In the interpretive guidance, the SEC indicated that it would … Continue Reading

Looking Ahead to the 2018 Proxy Season: Preparing for CEO Pay Ratio Rules Disclosure Requirements

As part of the Dodd-Frank Wall Street Reform and Consumer Protection Act enacted in July 2010, Congress directed the Securities and Exchange Commission (SEC) to adopt pay ratio disclosure requiring public companies to disclose the ratio between the annual total compensation of the median employee and the company’s principal executive officer (PEO), generally the company’s … Continue Reading

IRS Eliminates Requirement to Submit Copy of Section 83(b) Elections with Tax Return

The IRS adopted final regulations that no longer require taxpayers who have made Internal Revenue Code §83(b) elections to attach a copy of the election to their annual federal income tax return. Under §83, restricted stock granted in connection with the performance of services generally becomes taxable as ordinary income compensation when it is no … Continue Reading

IRS Proposes Modifications to Proposed Income Inclusion Regulations under Section 409A

In general, proposed rulemaking issued in December 2008 with respect to income inclusion under Section 409A of the Internal Revenue Code of 1986, as amended (available here) provides that if there is a Section 409A violation in a taxable year, all compensation deferred under the applicable nonqualified deferred compensation arrangement for that taxable year and … Continue Reading

Proposed Section 409A Regulations Would Clarify Separation from Service Analysis in Connection with Change in Status From Employee to Independent Contractor

Pursuant to the final regulations under Section 409A of the Internal Revenue Code of 1986, as amended, a termination of employment generally occurs at such time as the employer and employee reasonably anticipate that the level of services to be performed after such time, whether as an employee or an independent contractor, would permanently decrease … Continue Reading

IRS Releases Proposed Regulations To Clarify Section 409A Provisions

The Internal Revenue Service (IRS) recently issued proposed Treasury Regulations (available here) that would clarify certain provisions of the final regulations under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”). The proposed regulations also would expand the anti-abuse provisions of proposed rulemaking issued in December 2008 with respect to income … Continue Reading

Senator Warren Leads Coalition to Expand Scope of Limitations on Executive Compensation Tax Deductions

Section 162(m) of the Internal Revenue Code generally limits the deductibility of compensation paid in excess of $1 million to the chief executive officer and the three other highest compensated officers (other than the chief financial officer) of a public corporation with securities registered under Section 12 of the Exchange Act. However, payments of certain … Continue Reading

Tax Consequences of Compensation Clawback

Executives required to repay compensation as a result of a compensation clawback regulation, provision or policy should be mindful of certain tax consequences to the executive as a result of the repayment. As described below, the tax consequences will be different when repayment occurs in a year subsequent to the year of the original payment … Continue Reading

FASB Updates for 2016 Financial Statements Could Impact Permissible Adjustments under Code Section 162(m)

IRC Section 162(m) provides that a public company may not deduct annual compensation paid to a “covered employee” in excess of $1,000,000 per year, other than certain “qualified performance-based compensation.” For these purposes, “covered employees” generally include the company’s CEO and its three most highly compensated executive officers (other than the CEO and CFO) identified … Continue Reading
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