Paul L. Caron

Saturday, March 28, 2009

NYSBA Issues Report on Remedying Documentary Noncompliance by § 409A Plans

The New York State Bar Association Tax Section has released a report on Remedying Documentary Noncompliance by Section 409A Plans in Response to Notice 2008-113 (No. 1180):

Notice 2008-113, 2008-51 I.R.B. 1305 (Dec. 22, 2008), requests comments on the possibility of establishing a voluntary compliance program that would provide relief to taxpayers that have established a nonqualified deferred compensation plan that fails by its terms to comply fully with Section 409A ... to bring the plan into compliance. This report responds to Notice 2008-113’s request for comments. ...

[W]e propose below a three-pronged program. The first would set out specific, narrowly targeted types of violations which may be viewed as presenting a low probability of abuse and which we therefore view as appropriate for inclusion in a list of correctable violations. The second would relate to those circumstances in which errors are quickly discovered and corrected. The third involves the establishment of a policy of prospective enforcement and liberal transitional relief to allow taxpayers to adapt to new authorities interpreting Section 409A or changes in enforcement approach. Our proposals are intended to facilitate the establishment of a program consistent with Treasury's and the IRS's two identified general principles, while also addressing over the course of our discussion below the seven issues specifically identified by Treasury and the IRS for comment.

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