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ARTICLE · 14 SEPTEMBER 2007

IRS Issues Limited "Relief" To Bring Documents Into Compliance With Section 409A Regulations

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Internal Revenue Code Section 409A is the latest effort to use the tax laws to regulate executive compensation. Enacted in 2004, Section 409A imposes substantial penalties on nonqualified deferred compensation arrangements that fail to meet its many requirements.

United StatesTax
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Internal Revenue Code Section 409A is the latest effort to use the tax laws to regulate executive compensation. Enacted in 2004, Section 409A imposes substantial penalties on nonqualified deferred compensation arrangements that fail to meet its many requirements. Because of the scope and complexity of Section 409A, the Internal Revenue Service ("IRS") and the Treasury Department have previously provided generous transition relief for taxpayers to comply with Section 409A. Earlier this year, final regulations were released. The IRS and Treasury stated at that time that deferred compensation arrangements must be in full compliance, both in written form and operation, by January 1, 2008, in order to avoid Section 409A penalties.

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