Matters of Interest - Volume 39

Wilson v. Safelite: A Call for Careful Administration of NDCPs

A Sixth Circuit Appellate Court recently ruled on an appeal by Daniel H. Wilson regarding the application of Internal Revenue Code Section 409A (“409A”) penalties to his nonqualified deferred compensation. Wilson v. Safelite Grp., Inc., 930 F.3d 429 (6th Cir. 2019). Mr. Wilson, the former President and CEO of Safelite Group, Inc. (“Safelite”), argued that Safelite should be liable for part or all of the penalties applied to his deferred compensation as a result of 409A violations caused by Safelite. The court found against Mr. Wilson, but the case is a timely reminder of the need for careful administration, even if the employer will not, ultimately, be liable. (read more)

Excise Tax on Compensation of Highly Compensated Employees of Tax-Exempt Organizations

The TCJA created Section 4960, a 21% excise tax on compensation above $1 million for certain highly compensated employees (“covered employees”) of tax-exempt organizations (“Compensation Tax”) and certain payments contingent upon the covered employee’s termination of employment (“Termination Tax”). The excise tax is an attempt to mimic the effects of Section 162(m)’s $1 million deduction limitation, applicable to public companies, and the Section 280G deduction disallowance for payments to covered employees contingent upon a change in control, for tax-exempt organizations. (read more)