Proposed Deferred Compensation Restrictions For Offshore Entities

Originally published June 3, 2008

Keywords: offshore entities, deferred compensation, restrictions, non-determinable benefits, nonqualified entity , 409A, single asset investments, benefits,

Recently proposed federal legislation would, if enacted, dramatically limit the ability of certain offshore entities to provide nonqualified deferred compensation to US taxpayers. The restrictions imposed by the bill (referred to in this memorandum as the "Deferred Compensation Restrictions") would require that such compensation be includible in the US taxpayer's income at the time it becomes vested. (Under current rules, recognition would be deferred to the date of actual payment, subject to the requirements of tax code section 409A and general principles of constructive receipt.)