IRS Reverses Position of Executive CompensationMarch 11, 2008 The Legal Intelligencer
In a recent private letter ruling (PLR 200804004) and a companion published ruling (Rev. Rul. 2008-13), the Internal Revenue Service has reversed its prior position with respect to the structuring of executive compensation arrangements. In this recent ruling, the IRS concluded that performance-based compensation arrangements maintained by public companies that also allow for the payment of compensation in the event of the company's involuntary termination of an executive's employment without cause or the termination of employment by an executive for good reason or upon retirement, will cause the entire compensation arrangement to fail to qualify as "performance-based compensation" exempt from the $1 million cap on the deductibility of executive compensation contained in Code Section 162(m).
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