Will Tax Reform Change Code Section 409A?
November 10, 2017
As we discussed earlier this week, (see Proposed Tax Bill Radically Alters Nonqualified Deferred Compensation and Executive Compensation), H.R. 1 – Tax Cuts and Jobs Act (the “Bill”), took aim at executive compensation. Of significance, the limited tax deferral opportunities under the proposed rules could effectively “kill” nonqualified deferred compensation plans. Apparently, the employer community blew up House Ways and Means Committee members’ telephone lines after the Bill was released, because a second amendment to the Bill was issued, and these new rules on nonqualified deferred compensation were deleted. Thus, the Bill in its current form leaves the tax treatment of nonqualified deferred compensation unchanged.
Does that end the discussion? The answer is a big NO. The Senate has issued its version of tax reform, and it contains changes similar to the initial version of the House Bill. As noted in the Senate Committee on Finance Description of the Chairman’s Mark of the Bill, “any compensation deferred under a nonqualified deferred compensation plan is includible in the gross income of the service provider when there is no substantial risk of forfeiture of the service provider’s rights to such compensation.” This brings us back to where things stood earlier this week, and the discussion of these rules in our article continues to be accurate (at least for today).
© Copyright 2017 • Findley Davies | BPS&M • All rights reserved