TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

A Member of the Law Professor Blogs Network

Monday, February 13, 2012

Polsky: Fixing Section 409A

Gregg D. Polsky (North Carolina), Fixing Section 409A: Legislative and Administrative Options, 55 Vill. L. Rev. ___ (2012):

This [article] ... describes the legislative calamity that is § 409A of the Internal Revenue Code. Section 409A manages, all at once, to (i) fail to better neutralize the tax treatment of deferred compensation with that of current compensation, (ii) impose significant compliance costs on sophisticated taxpayers, and (iii) provide a dangerous trap for unsophisticated taxpayers.

Ideally, Congress should repeal § 409A and replace it with a system that taxes deferred compensation more neutrally vis-a-vis current compensation. Failing that, Congress should either replace § 409A with a broad grant of authority to the Treasury and IRS to strengthen the constructive receipt and economic benefit doctrines or amend § 409A to limit its scope to employee compensation paid by public companies.

If Congress fails to act, the Treasury should interpret the term “compensation” as used in § 409A to include only compensation paid by public companies to their employees or directors. This arguably counter-textual interpretation of the statute creates the potential for whipsaw of the IRS by nonpublic companies and their employees, but this problem is outweighed by the benefits from cleaning up § 409A.

http://taxprof.typepad.com/taxprof_blog/2012/02/polsky-.html

Scholarship, Tax | Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341c4eab53ef016300d17d30970d

Listed below are links to weblogs that reference Polsky: Fixing Section 409A:

» The best way to fix it is to kill it from Roth & Company, P.C.
A North Carolina tax professor gets the Section 409A deferred compensation rules: This [article] ... describes the legislative calamity that... [Read More]

Tracked on Feb 13, 2012 9:04:44 AM

Comments

First they came for retirement accounts. But I said nothing, for I did not have a retirement account.....

Posted by: Dr. K. | Feb 13, 2012 5:31:32 AM