One week ago the Republicans’ Tax Bill H.R. 1, the “Tax Relief and Jobs Act,” was released. Section 3801 of that bill proposed to significantly curtail deferred compensation arrangements by replacing Internal Revenue Code section 409A with section 409B for all services performed on or after January 1, 2018. It would have also required all deferred compensation deferred before 2018 under current section 409A to be included in income no later than 2025.
On November 9, 2017, House Ways and Means Committee Chairman Kevin Brady released an amendment striking these proposed changes. According to the summary released with the Chairman’s amendment, the “amendment strikes Section 3801 so that the current-law tax treatment of nonqualified deferred compensation is preserved.”
So, at least for now, deferred compensation arrangements will be allowed to continue. We will continue to monitor updates to the tax reform proposals.