Effective for taxable years beginning after December 31, 2017, section 4960 of the Internal Revenue Code imposes a tax at the corporate income tax rate (currently 21 percent) on two types of compensation paid by applicable tax-exempt organizations (ATEOs) to their covered employees. An ATEO’s covered employees generally include its five highest paid employees for … Continue Reading
Earlier this week, the IRS issued long-awaited proposed regulations under Section 162(m) of the Internal Revenue Code. Our colleagues at Covington’s Tax Reporting & Withholding Blog published a comprehensive summary and analysis of the proposed regulations. As you will see, the proposed regulations fell short of proposing workable solutions for public companies wrestling with the changes … Continue Reading
As part of the Tax Cuts and Jobs Act of 2017, Congress enacted new § 4960 of the Internal Revenue Code. Section 4960 imposes an excise tax on certain executive compensation paid by tax-exempt organizations – similar to the $1 million limit on deductions for compensation paid to highly paid executives in for-profit companies under … Continue Reading
This article originally appeared in Law360. Companies have had a lot to digest since the passage of the Tax Cuts and Jobs Act (the “TJCA”) late last year. But for executive compensation attorneys and professionals who work with or advise public companies, the elimination of the tax deduction for performance-based compensation under section 162(m) of … Continue Reading
Part of Our Series on the Tax Cuts and Jobs Act of 2017 When an employee exercises a stock option or receives shares of stock from the settlement of a restricted stock unit (or “RSU”), generally the employee has income based on the value of the stock received. Income tax and Social Security and Medicare … Continue Reading
Part of Our Series on the Tax Cuts and Jobs Act of 2017 Employers generally may deduct reasonable salaries and other compensation paid to their employees. However, section 162(m) of the Internal Revenue Code imposes a $1 million annual limit on the amount of compensation that a publicly held corporation can deduct with respect to … Continue Reading
Existing rules in Europe require, and proposed rules in the U.S. would require, companies and financial institutions to have in place effective clawback policies. Under such policies, employers have the ability to recover compensation paid to employees when certain events occur or information comes to light that could have an adverse effect on the employer. … Continue Reading
On August 5, 2015, the Securities and Exchange Commission adopted, by a three-to-two vote, a rule that will require most public companies to disclose, annually, the ratio of the median of the annual total compensation of the company’s employees to the annual total compensation of the company’s principal executive officer. Companies must comply with the … Continue Reading
Although executive compensation has been under significant scrutiny for many years, directors’ compensation has flown somewhat under the radar. That may be about to change: in Calma v. Templeton, a Delaware court recently held that the level of compensation granted to non-employee directors should be reviewed under the “entire fairness” standard rather than under the … Continue Reading
The Securities and Exchange Commission has proposed a rule that will require companies with listed securities to recover incentive compensation based on erroneous financial statements. The proposed rule will also require new disclosures concerning listed companies’ clawback policies and their efforts to recover incentive compensation pursuant to the policies. The proposed rule and a fact … Continue Reading
As business becomes increasingly globalized, multinational corporations are sending more executives on international assignments and hiring more expatriates to fill local positions overseas. Compensation connected to these employment patterns can create a series of legal and regulatory challenges. For example, unless an exception applies, U.S. citizens and U.S. residents are subject to U.S. federal income … Continue Reading
Finding a 409A violation generally prompts a sometimes frantic search for a means of correction under various IRS pronouncements. One previously helpful — but now slightly limited — such item was included in the proposed income inclusion regulations, which were issued in December 2008. Those regulations, which have not been finalized but which may be … Continue Reading
By David Engvall, Reid Hooper, Keir Gumbs, and David Martin On April 29, 2015, the Securities and Exchange Commission (the “SEC”) proposed a new rule that would require public companies to provide new disclosures annually regarding the relationship, over a five-year period, between executive compensation actually paid and a measure of financial performance of the … Continue Reading
On February 9, 2015 the SEC proposed rules, as required by Section 955 of Dodd-Frank, that would require disclosure regarding whether directors, officers and other employees are permitted to hedge or offset any decrease in the market value of equity securities granted by the company as compensation or held, directly or indirectly, by employees or … Continue Reading
Employers should consider reviewing their procedures for withholding and paying FICA tax in light of the recent district court decision in Davidson v. Henkel Corp. The court concluded that the employer was liable to participants in a nonqualified deferred compensation plan for failing to withhold FICA tax in a manner that would have decreased their … Continue Reading
Withholding and paying FICA tax on nonqualified deferred compensation can be a tricky business. Because special timing rules apply to FICA tax, employers can’t simply withhold and pay FICA tax when they pay deferred compensation to the employee. Instead, FICA tax is due when the deferred compensation vests (or, in some cases, when the amount … Continue Reading
The Affordable Care Act created two new taxes for individuals whose income exceeds $200,000 ($250,000 for married couples filing joint returns). Employees must pay an additional 0.9% Medicare tax on wages in excess of these dollar thresholds. Individuals whose adjusted gross income exceeds the dollar thresholds also must pay a 3.8% tax on their net … Continue Reading
On September 18, 2013, the Securities and Exchange Commission (“SEC”) proposed a rule that would require most public companies to disclose, annually, the ratio of the median of the annual total compensation of all of the company’s employees to the annual total compensation of the company’s principal executive officer. This rule is mandated by Section … Continue Reading
Earlier today in United States v. Windsor, the Supreme Court struck down section 3 of the federal Defense of Marriage Act (“DOMA”). Section 3 of DOMA limits the definition of marriage for purposes of federal law to marriage between individuals of the opposite sex. The Court held that DOMA deprives same sex couples of due … Continue Reading
At a recent forum in New York, a team of Covington & Burling LLP lawyers addressed the growing concern among companies that their most valuable assets might just walk out the front door on a thumb drive in an employee’s pocket or otherwise be taken by company insiders. Although much of the discussion in this … Continue Reading
As recently reported in a Wall Street Journal article, plaintiffs’ lawyers hatched a new generation of executive compensation lawsuits in 2012, which are expected to be rolled out again in 2013. These lawsuits are distinct from the first generation of “say-on-pay” lawsuits in 2011, which generally were filed against companies following shareholder meetings based on … Continue Reading
The Securities and Exchange Commission (SEC) recently approved changes to the listing standards of the New York Stock Exchange (NYSE) and NASDAQ relating to the independence of compensation committee members and the responsibilities of compensation committees when selecting compensation consultants, legal counsel, and other advisers. The final listing standards are substantially the same as those … Continue Reading
Employers are deluged with annual reporting requirements for their compensation and benefit plans. One requirement that often flies under the radar is the obligation to furnish and file Form 3921 for exercises of incentive stock options (“ISOs”) and Form 3922 for certain shares purchased under an employee stock purchase plan (“ESPP”). The deadline for furnishing … Continue Reading
In the coming year, we expect to see continued activity on the part of the agencies and Congress with respect to employee benefits and executive compensation. The following is a preview of major guidance anticipated in 2013. … Continue Reading
