On April 21, 2017, the Trump Administration issued Executive Order 13789, which instructed the IRS to review all “significant tax regulations” issued on or after January 1, 2016 to identify as targets for modification, rescission or delayed effectiveness any regulations that (i) impose an undue financial burden on U.S. taxpayers; (ii) add undue complexity to the Federal tax laws; or (iii) exceed the statutory authority of the IRS. Having completed this review, earlier this month, the IRS issued Notice 2017-38 identifying eight regulations for burden reduction, none of which directly relate to compensation.
In addition, pursuant to Executive Order 13777, Presidential Executive Order on Enforcing the Regulatory Reform Agenda, issued on February 24, 2017, the IRS is conducting a broader review of existing regulations. In Notice 2017-38, the IRS reiterated that it is inviting public comment concerning regulations that should be modified or eliminated in order to reduce unnecessary burdens, as well as comment on recommendations for the IRS’s 2017-2018 Priority Guidance Plan.
We will be taking this opportunity to comment on various tax regulations and other IRS guidance relating to compensation, including among other things:
- Problematic aspects of the income inclusion regulations and error correction programs under Code Section 409A;
- Difficulties with the tests for identification of “nonqualified entities” for purposes of Code Section 457A;
- Desired liberalization of the rules around withholding rates to be applied to supplemental wages, including with respect to an employee’s election of a specific withholding rate;
- Grounds for abandonment of the IRS’s proposed changes to the “next-day rule” as they apply to stock option and other equity compensation deductions of a corporation that joins or leaves a consolidated group; and
- Simplification of certain aspects of the per diem rules applicable to employees who travel for business.
If your company would like us to comment on any other compensation-related tax regulations or guidance that you consider burdensome, please let us know. We plan to submit our comments by July 31, 2017.