It’s quite rare that I blog other than early in the morning. It’s too tempting to chase news across the day. But I thought I would throw up some big news regarding the earth-shattering House tax bill. Here’s the skinny about how the House made changes to its tax bill on November 9th (see this official summary):
1. The House has deleted the offending provisions about equity compensation from the bill (Section 3801 of the bill) – but it left in the provision allowing deferral of tax of stock options for private companies. And it sounds like the provision is modified that so it no longer applies to RSUs (it originally applied to both RSUs & options).
2. The changes to Section 162(m) still stand (Section 3802 of the bill). I think that’s a done deal, assuming they can get the rest of the bill passed. It’s clearly a revenue raiser and if the corporate tax rate is only 20%, companies probably don’t care about the deduction as much anyway. I’m sure it’s a trade-off many companies are willing to make.
According to news from this FW Cook blog (also see this Fenwick & West memo – and Davis Polk blog): The Senate Finance Committee Chairman Hatch also released details of the Senate’s version of the Tax Cuts and Jobs Act. The most notable development for executive compensation is that the Senate bill generally contains the same executive compensation related provisions that were included in the first, and now outdated, release of the House bill (H.R. 1).
As previously reported, H.R. 1 was amended on November 9th to remove Section 3801 of the bill, which provided for sweeping changes to the tax treatment of non-qualified deferred compensation, including stock options, under a new “Section 409B.”
For the moment, the new deferred compensation rules may be back on the table. The Senate Finance Committee meets for the first time today, November 13th to begin consideration of the bill. Both the House and Senate versions are subject to further change, votes, and eventually reconciliation before final passage.