(Archived Content)
FROM THE OFFICE OF PUBLIC AFFAIRS
To view or print the PDF content on this page, download the free AdobeAcrobatReader.
JS-627Today, the Treasury Department and the IRS issued final regulations for golden parachute payments. Treasury and IRS also issued a new revenue procedure for valuing stock options that are treated as golden parachute payments.
Under the Internal Revenue Code, a company cannot deduct excess golden parachute payments, and an executive has to pay a 20-percent excise tax on the payments. A golden parachute payment is a payment made in connection with a change in ownership or control of a company.
The final regulations generally follow the proposed regulations that were published in February of 2002. As under the proposed regulations, stock options granted or vested as part of a change of control are parachute payments. The new revenue procedure revises an earlier valuation method for stock options. The valuation method continues to allow the use of Black-Scholes and certain other option valuation methods, but it provides new flexibility to make certain adjustments for early termination of employment or changes in volatility of stock price.
The final regulations are effective for payments made in connection with a change of ownership or control occurring on or after January 1, 2004. Taxpayers cannot rely on the 2002 proposed regulations after that date.
The final regulations and the revenue procedure are attached.
-30-
Related Documents:
Use featured image
Off