Feb 19, 2008

Update on Performance-Based Compensation Changes Impacting Public Companies

In follow-up to an article in our recent February Employee Benefits E-Alert, entitled IRS Drastically Changes its View of Performance-Based Compensation, which generated a lot of interest from our publicly-held clients, please note:

We recently attended a webcast whose speakers included IRS representative Kenneth Griffin, the author of the IRS’ Private Letter Ruling 200804004.  As we recently reported to you, PLR 200804004 indicates a change in the IRS’ view of certain types of performance-based pay under Section 162(m) of the Internal Revenue Code, which potentially could result in both the need for publicly-held companies to review and amend their executive compensation arrangements and to restate or otherwise modify their financial reporting.

Mr. Griffin stated flatly that no one should act (e.g., by amending existing arrangements) based on the Private Letter Ruling until further guidance is issued. He indicated that the IRS would publish further guidance (already in draft form) by the end of the month.  We will update you when the further guidance is published.

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