Post by Sapphire Capital on Jul 11, 2008 23:51:30 GMT 4
On January 25, 2008, the Internal Revenue Service ("IRS") released Private Letter Ruling ("PLR") 200804004. (see: www.irs.gov/pub/irs-wd/0804004.pdf) This new ruling has reversed an important position that served as guidance to public companies and practitioners regarding the tax deductibility of certain performance-based pay under Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). Code Section 162(m) generally limits the ability of public companies from deducting compensation in excess of $1 million paid to certain executive officers. However, compensation that meets the requirements of "performance-based compensation" is exempt from the $1 million limit under Code Section 162(m). Generally, compensation qualifies as performance-based only if it is payable when predetermined performance objectives are actually achieved in accordance with performance criteria that has been approved by shareholders. The regulations under Code Section 162(m) provide that compensation does not fail to qualify as performance-based merely because compensation is payable upon death, disability or a change in ownership or control.
This topic has come up in loan scenarios were compliance counsel in banks asked for re-screening of collateral arrangements using compensation arrangement pledges to avoid margin calls
This topic has come up in loan scenarios were compliance counsel in banks asked for re-screening of collateral arrangements using compensation arrangement pledges to avoid margin calls