The WRMarketplace is created exclusively for AALU members by experts at K&L Gates and the AALU staff, led by James E. Earle, Matthew R. Jones, Richard H. Nettles, and Rebecca Liu. The AALU WR Newswire and WR Marketplace are published by the AALU as part of the Essential Wisdom Series, the trusted source of actionable...
Tax reform
Retracting the Claws – Proposed Regulations Seek to Eliminate Estate Tax Clawback
Topics: Estate planning, Estate tax, Tax reform
In legacy planning, “clawback” generally refers to the additional estate taxes that could be triggered by lifetime gifts if the unified federal gift and estate tax exemption is less at the time of death than at the time of the gift. If there is a lower exemption at death, the current estate tax rules would…
IRS Issues New 162(m) Rules Related to Grandfathered Benefits under Deferred Compensation Plans.
Topics: 162(m), COLI/BOLI, Congress, NQDC, Tax reform
Changes to 162(m) made by the Tax Act expand the $1 million deduction limit for covered employees at public companies. NQDC amounts accrued as of November 2, 2017 can escape these expanded deduction limits if the NQDC amounts meet certain grandfather requirements to remain covered by the pre-Tax Act 162(m) rules (“old 162(m)”). The Notice…
Recent Trends in Litigation over Director Compensation Highlight Risks and Suggest Actions to Mitigate those Risks
Topics: COLI/BOLI, Congress, NQDC, Tax reform
Decisions about levels of director compensation often do not receive the protection of the business judgment rule because directors are usually interested in decisions about their own compensation levels. Under Delaware case law, however, stockholders face significant legal barriers in challenging these director compensation decisions if the stockholders previously approved the director compensation levels. These…
Effective January 1, 2018, the Tax Act amended the deduction limitations under Internal Revenue Code §162(m) for executive compensation. The specific changes include: (1) elimination of the “qualified performance-based” pay exception to the $1 million deduction limitation on compensation for “covered employees” and (2) expansion of the scope of §162(m) so that more companies and…
Legacy Planning Post-Tax Reform – Part 1: Let Me Count the Ways: 5 Questions for Non-Taxable Estates
Topics: Tax reform, Transfer taxes
The doubling of the federal gift, estate, and generation-skipping transfer (“GST”) tax exemptions ($11.18 million in 2018) has drastically reduced the number of individuals whose estates will incur a federal estate tax. Yet, potential estate tax exposure should not be the sole motivator for legacy and life insurance planning.
The Tax Cuts and Jobs Act (the “Act”) limits the federal income deduction for personal SALT to just $10,000, whether taken by an individual tax filer or a married couple filing jointly. The provision significantly affects individuals in high tax states, who may see their tax liability increase, despite reductions in federal individual tax rates.
For 75 years, alimony payments have been allowed as an income tax deduction for the paying spouse and treated as taxable income to the recipient spouse. The 2017 Tax Act, however, significantly changes this tax treatment for divorce decrees and other agreements for support or maintenance incident to a divorce (collectively referred to as “marital…
The tax reform legislation (the “Act”) is headed to the President to be signed into law. The Act varies from the Senate’s recently passed version of the bill, including: (1) lowering the top individual rate from 38.5% to 37%, (2) increasing the corporate tax rate to 21% and repealing the corporate alternative minimum tax (“AMT”),…
Over the weekend, the Senate passed its version of the Tax Cut and Jobs Act (“Senate Bill”) making some significant last-minute changes from its prior mark-up (“Prior Senate Bill”), including (1) the retention of the individual and corporate alternative minimum taxes (“AMTs”), (2) an increase in the deduction for qualified business income from pass-through entities...