IRS Program Permits Avoiding Section 409A´s 20% Penalty Tax For Certain Unintentional, Operational Violations Under Certain Compensation Arrangements

OVERVIEW OF LATEST DEVELOPMENT

On Dec. 5 the IRS announced Notice 2008-113, providing correction methods for certain unintentional, operational failures in relation to non-qualified deferred compensation arrangements and certain equity awards that would otherwise invoke the 20% penalty tax under Section 409A ("Section 409A") of the Internal Revenue Code of 1986, as amended (the "Code"). California, which has enacted a parallel 20% penalty tax may, in light of this Notice, announce their own correction program or provide that corrections made under this program will be effective to prevent imposition of California's parallel penalty tax. Prior corrections guidance in Notice 2007- 100 is superseded by Notice 2008-113.