On January 14, 2025, the Internal Revenue Service (âIRSâ) published proposed regulations (the âProposed Regulationsâ) under Section 162(m) of the Internal Revenue Code (âCodeâ), which generally limits publicly held companies to a $1 million annual tax deduction for compensation paid to âcovered employeesâ in a taxable year. The Proposed Regulations implement amendments made to Code Section 162(m) by the American Rescue Plan Act of 2021 (the âARPAâ) to expand the definition of âcovered employeeâ to…
The wildfires in Los Angeles County have wreaked devastation in the area, with thousands of homes and other structures, vehicles, and more destroyed by the worst wildfire in L.A. history. In response, on January 8, 2025, President Biden approved a Major Disaster declaration for California, allowing impacted communities and survivors to immediately access funds and resources to jumpstart their recovery. As it stands, impacted individuals are in need of funds, housing, food, clothing, medical care,…
Institutional Shareholder Services (ISS) has released its executive compensation and equity plan policy updates for the 2025 proxy season, reflecting its approach to determining its proxy voting recommendations on say on pay and equity plan proposals for shareholder meetings held on or after February 1, 2025. The updates to ISSâs existing policies are fairly light overall, but it is notable that there will be heightened scrutiny of the design and disclosure of performance-vesting equity awards,…
On November 7, 2024, for the first time, the Internal Revenue Service (IRS) has made available a form on which elections under Section 83(b) of the Internal Revenue Code may be made. This new Form 15620 provides a standardized method for elections and should streamline the process of making an 83(b) election. However, the new form is not required to be used, and taxpayers may continue to use their own form of election, provided it…
Two more federal Circuit Courts have weighed in on whether mandatory arbitration provisions with class action waivers are enforceable under the U.S. Employee Retirement Income Security Act of 1974, as amended (âERISAâ). With recent rulings in Cedeno v. Sasson, 100 F.4th 386 (2d Cir. 2024) and Parker v Tenneco, 2024 WL 3873409 (6th Cir. Aug 1, 2024), the Second and Sixth Circuits now join the Third, Seventh, and Tenth Circuits in holding that arbitration provisions…
Earlier this year, the Internal Revenue Service (“IRS”) announced it would be using advanced analytic techniques and additional funding to audit tax compliance by businesses when their business aircraft are used for personal reasons by executives. The IRS’s Large Business and International Division also added a “Business Aircraft Campaign” to its list of compliance campaigns. This focus by the IRS appears to have triggered calls for it to revisit the manner in which personal use…
The Securities and Exchange Commission (SEC) last year amended rules under the Securities Exchange Act of 1934 to shorten the securities transaction settlement cycle for most broker-dealer securities transactions, from “T+2” to “T+1,” meaning that securities transactions will need to be settled within one business day of the transaction date (“T”), effective as of May 28, 2024. Impact on Equity Awards The new SEC-required settlement timing will directly impact equity awards that are settled through…
As many readers likely know, last fall California doubled-down on the state’s hostility to noncompete agreements. Assembly Bill 1076 codified the landmark 2008 Edward v. Arthur Andersen decision that invalidated all employment noncompetes, including narrowly tailored ones, unless they satisfy a statutory exception.AB 1076 also added new Business & Professions Code §16600.1, requiring California employers to notify current (and certain former) employees that any noncompete agreement or clause to which they may be subject is void (unless it falls within one of…
On September 27, 2023 and November 21, 2023, the Securities and Exchange Commission (SEC) issued additional Compliance & Disclosure Interpretations (CDIs) clarifying certain technical aspects of the pay versus performance (PVP) disclosure rules under Item 402(v) of Regulation S-K[1]. These CDIs are intended to supplement the CDIs covering PVP disclosure that were issued by the SEC on February 10, 2023.[2] By way of background, covered public companies must comply with the PVP disclosure rules beginning…
One of the biggest sleeper issues (in my opinion) for US companies when granting equity awards to non-US employees or other service providers is the fact that their heirs may be assessed with US estate tax and be required to file an estate tax return in the US if the individual dies while holding equity awards or shares. US Estate Tax Exemptions Individual US taxpayers (i.e., US citizens and non-US citizens who are domiciled in…