Tax News

CCH (cch.taxgroup.com) reports:

  The IRS has clarified that a transaction under the Economic Stabilization Act of 2008 (EESA) (P.L. 110-343) that involves the acquisition by or on behalf of the Treasury Department of preferred stock, common stock, warrants to purchase common stock or other types of equity of a financial institution or other entity is not an event with respect to which a payment can be made under a Code Sec. 409A nonqualified deferred compensation plan. Pursuant to Code Sec. 409A(a)(2)(A)(v) and Reg. §1.409A-3(a)(5), this type of transaction, referred to as a Treasury EESA Equity Acquisition Transaction, is not a change in ownership or effective control, or a change in the ownership of a substantial portion of the assets of the corporation, collectively referred to as a change in control event. Consequently, the transaction is not a permissible Code Sec. 409A payment event and compensation that would otherwise be deferred is currently taxable to plan participants.

  A nonqualified deferred compensation plan will not fail to satisfy the plan document requirements of Code Sec. 409A(a) and the regulations thereunder simply because the plan does not explicitly provide that a Treasury EESA Equity Acquisition Transaction will not trigger a payment under the plan. For this purpose, it is irrelevant whether the plan incorporates the definition of a change in control event by reference to the final regulations (Reg. §1.409A-3(i)(5)) or sets forth a definition of a change in control event that otherwise meets the requirements of the final regulations.

  This guidance is effective June 4, 2009. The Treasury Department and the IRS intend to amend the regulations under Code Sec. 409A(a) to incorporate the guidance. The amended regulations will be applicable to Treasury EESA Equity Acquisition Transactions entered into on or after June 4, 2009.

Notice 2009-49, 2009FED ¶46,393

Other References:

 
Code Sec. 409A

  CCH Reference - 2009FED ¶18,960.025

  Tax Research Consultant

  CCH Reference - TRC COMPEN: 15,056.15
CCH Reference - TRC PLANRET: 3,206.35