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Reprieve on Section 409A Requirements
by Susan Mehlman, Director of Employee Benefit Services, Moss Adams
The Treasury Department and Internal Revenue Service have granted a special reprieve for taxpayers regarding their deferred compensation arrangements and has provided an additional year extension to comply with the full range of Section
409A requirements. Notice 2007-86 extends to December 31, 2008 the transition relief that was schedule to expire on December 31, 2007 regarding the application of section 409A to deferred compensation arrangements.
In October 2004, the Treasury Department and Internal Revenue Service drafted a complex set of rules designed to curb the perceived abuses of deferred compensation plans. Interim guidance has been provided since 2004 with final regulations
issued in April 2007.
The relief provided in Notice 2007-86 allows taxpayers to operate a nonqualified deferred compensation plan in compliance with the plan's terms to the extent consistent with section 409A and the applicable guidance (including Notice
2005-1). Where a provision is inconsistent with the final regulations, taxpayers may rely on either Notice 2005-1 or the final regulations. To the extent an issue is not addressed in Notice 2005-1 or other applicable guidance, taxpayers
must apply a reasonable good faith interpretation of the statute.
The final regulations did address stock valuation issues for privately held companies where their stock is not readily tradable on an established securities market. "Accordingly, a valuation of stock based upon a reasonable application of
a reasonable valuation method is treated as reflecting the fair market value of the stock." To meet this standard, it is not necessary for a taxpayer to hire an independent appraiser. Where the taxpayer can otherwise demonstrate that the
valuation was determined by the reasonable application of a reasonable valuation method, the standard will be met. The final regulations also adopt a safe harbor presumption for stock valuation purposes under specified circumstances.
To learn more, contact Susan Mehlman at
susan.mehlman@mossadams.com or 206.302.6363 .
FIN 48 Effective Date Deferred
by Andrew Cates, Tax Partner, Moss Adams LLP
At its November 7, 2007 meeting, the FASB directed the FASB Staff to issue a proposed FASB Staff Position (FSP) to defer the effective date of FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, for nonpublic
entities until periods beginning after December 15, 2007. The proposed FSP will include the definition of a "nonpublic entity" for purposes of applying this FSP and will be subject to a 30-day public comment.
FIN 48 governs how companies should account for uncertain tax positions in their financial statements. FIN48 was originally issued in June 2006 and went into effect for public companies January 1, 2007. This new decision by the FASB
postpones the requirement for nonpublic companies and partnerships to be in compliance with FASB's disclosure rule on uncertain tax positions for a year.
The FASB's action was in response to a recommendation letter sent by the Private Companies Financial Reporting Committee (PCFRC). While this decision means that companies may delay adopting FIN 48 for another year, Moss Adams recommends
that companies still document their tax positions in their books and records so that it is clear that a conclusion was reached that no positions require disclosure so as to meet the requirements under IRC §6694.
To learn more, contact Andrew Cates at
andrew.cates@mossadams.com or 206-302-6372.
Moss Adams Supports InvestSouthwest
December 12-13 in Scottsdale, AZ
Moss Adams is proud to sponsor Invest Southwest, the premier capital conference in Arizona and the Southwest. This event connects the region's most promising ventures with knowledgeable investors.
Presenting companies have received more than a quarter billion in investment dollars since inception of the conference in 1992. The "Best of the Southwest" will present their business plans and investment opportunities on December 12-13 at
the Four Seasons Resort Scottsdale at Troon North. The event also includes an investor seminar, a nationally-known keynote speaker, and a presenting company forum. For accredited investors only.
For more information, visit the
Invest Southwest web site.
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