Receipt of options under consulting agreement does not prevent qualification as outside director under s. 162(m)

Article Abstract:

The IRS ruled in PLR 9647005 that classifying a prospective director as a consultant solely to offer stock options in anticipation of appointment to the compensation committee did not offend the requirement that the corporation's compensation committee be composed of outside directors. An exception to IRC section's 162(m) disallowance of compensation in excess of $1 million for certain executives provides for deductibility of performance-based pay approved by a compensation committee. The stock options would have been forfeited if election to the board had not resulted.

Public Finance Activities, Corporate Tax Deductions & Exemptions, Taxation, Corporate directors, Corporate taxes, Merit pay

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Adoption of SERP not a material modification of employment agreements grandfathered under s. 162(m)

Article Abstract:

The IRS determined in PLR 9619046 that adoption of a supplemental executive retirement plan did not compromise the grandfather status under IRC section 162(m) of existing compensation agreements because the agreements were not materially modified. In disallowing deductions for compensation in excess of $1 million, section 162(m) exempted compensation agreements in place on Feb. 17, 1993, and not subsequently modified. The new benefits plan for the taxpayer's executives was designed to mirror existing benefits so that no material modification would result.

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