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November 20, 2017
H.R.1 as amended, the Tax Cuts and Jobs Act (TCJA), was passed by the U.S. House of Representatives, in a 227 to 205 vote, on November 16, 2017. The Senate Finance Committee version of the bill, most recently amended November 16, has been approved by the Committee and is anticipated to go to the Senate for a vote next week. The flurry of activity has seen “new” Code Section 409B come and go and preserved, for the moment, the current timing for taxation of most forms of executive deferred compensation. The good news is that it appears, for now, that tax reform will not have a substantial impact on the timing of taxation of equity and non-equity deferred compensation awards.
As we reported in our prior alert, the initial versions of the House and Senate tax reform proposals would have seen stock options and restricted stock units (RSUs) taxed at the time of vesting, with “vesting” being tied to a concept of a substantial risk of forfeiture based solely on future performance of substantial services. Current common deferred compensation designs which tie “vesting” to events such as a “change in control” would have no longer provided an effective means of tax deferment.
Below is an updated summary of “what’s in” and “what’s out”:
Both the House-passed TCJA and the Senate version retain the following:
The Senate is expected to vote on its version of tax reform next week. Stay tuned.
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