Tax News

CCH (cch.taxgroup.com) reports:

  Although the IRS will continue not to issue advance rulings or determination letters on the income tax consequences of establishing, operating, or participating in a nonqualified deferred compensation plan, as described in Code Sec. 409A, the Service may issue rulings on the application of certain other tax provisions to taxpayers who participate in those plans. Specifically, for rulings and determination letters issued after September 25, 2008, the IRS may address issues such as the estate and gift tax consequences of proposed inter vivos or testamentary transfers of rights under nonqualified deferred compensation plans that may be covered by Code Sec. 409A, and issues arising under the Federal Insurance Contributions Act (FICA) with respect to nonqualified deferred compensation.

  CCH Comment.
Code Sec. 409A contains requirements that apply to nonqualified deferred compensation plans. If the plan does not meet specified requirements, a participant must immediately include amounts deferred under the plan in income and pay additional taxes on such income. The IRS prohibition against issuing rulings encompassed matters tangential to issues regarding the establishment and operation of nonqualified deferred compensation programs under Code Sec. 409A. On April 7, 2007, final regulations were issued under Code Sec. 409A that apply on January 1, 2009, and define "nonqualified deferred compensation plan" and "deferral of compensation" for purposes of Code Sec. 409A. Transitional relief, as well as guidance on the correction of certain failures of nonqualified deferred compensation plans, is provided in Notice 2007-100, I.R.B. 2007-52, 1243, issued on December 3, 2007. In light of this additional guidance, the IRS has determined that the existing no-rule policy unnecessarily restricts its ability to issue private letter rulings.

  Pursuant to Section 3.01 of Rev. Proc. 2008-3, as modified and amplified by Rev. Proc. 2008-61, the IRS will continue not to issue rulings with respect to:

  --the income tax consequences of establishing, operating, or participating in a nonqualified deferred compensation plan as defined in Reg. §1.409A-1(a);

  --whether a plan is a plan subject to a totalization agreement or similar plan;

  --whether a plan is a broad-based foreign retirement plan;

  --whether a plan is a bona fide vacation leave, sick leave, or compensatory time plan; and

  --whether a plan provides for the deferral of compensation under Reg. §1.409A-1(b).

 
Rev. Proc. 2008-3, I.R.B. 2008-1, 110, is modified and amplified.

Rev. Proc. 2008-61, 2008FED ¶46,586

Other References:

 
Code Sec. 409A

  CCH Reference - 2008FED ¶18,960.25

 
Statement of Procedural Rules Sec. 601.201

  CCH Reference - 2008FED ¶43,360.60

  Tax Research Consultant

  CCH Reference - TRC COMPEN: 15,050
CCH Reference - TRC IRS: 12,214.20