A recent Private Letter Ruling reversing the IRS's position on the tax code's $1 million cap on exemptions for performance-based compensation could have created difficulties for companies making decisions about their 2008 executive compensation awards and proxy reporting on award deductibility.

On February 19, 2008, 90 major law firms sent the IRS a request for guidance. White & Case, having played a key role in drafting the request, was designated as one of the four contacts for discussions with the IRS on behalf of all signatories of the letter. Click here to view the letter (PDF).

In response, the IRS quickly issued an official Revenue Ruling. The Ruling provides key transitional relief, as urgently sought. Click here to view the Revenue Ruling (PDF).


"Oringer said he would like to see IRS use reasonable administrative discretion in not pursuing this revised position in a manner adverse to taxpayers who have up to now acted in good faith. Oringer said it is his hope the revised position 'will be applied judiciously on a going forward basis.'"

-- BNA, Inc.'s Pension & Benefits Daily (Jan. 31, 2008)

"[T]he [IRS] ruling is somewhat deceiving, as in some ways the result seems straightforward. Performance bonuses cannot be paid after an involuntary termination if the goals aren't met. A problem is that, whether or not the result is simple, taxpayers had been proceeding under the old rulings with allowing automatic payments after an involuntary termination."

"The letter...present[s] a clear and concise picture to the regulators. I think the IRS has shown that it wants to listen to and understand the market's concerns and react swiftly and reasonably. We don't yet know exactly what the IRS's reaction will be, but it is extremely encouraging that there appears to be a willingness to have a productive dialogue on these points."

-- Andrew Oringer, Co-Head of White & Case's US Executive Compensation and Benefits Practice , quoted in BNA, Inc.'s Pension & Benefits Daily (Feb. 21, 2008)


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