Senate Finance Committee Publishes Legislative Text of Deferred Compensation Proposals

On January 23, 2007, the New York office released an Alert Memorandum entitled, “Senate Finance Committee Publishes Legislative Text of Deferred Compensation Proposals.” The Senate Finance Committee published the legislative text of the Small Business and Work Opportunity Act of 2007, which includes amendments to the Internal Revenue Code of 1986, as amended (the “Code”), that would (i) significantly curtail any employee’s ability to defer compensation in excess of $1,000,000 per year under Section 409A of the Code and (ii) broaden the definition of “covered employee” under Section 162(m) of the Code so as to apply the $1,000,000 deduction limitation to payments made to a “covered employee” even after such individual ceases to serve in that capacity. They also published the Finance Committee Report to the “Small Business and Work Opportunity Act of 2007,” dated January 22, 2007 (the “SFC Report”). In certain instances, the legislative text and the SFC Report help to clarify ambiguities contained in the prior Chairman’s Markup addressed in our Alert Memorandum dated January 17, 2007. The attached memorandum is intended to highlight some of the key clarifications provided by the proposed legislative text and accompanying SFC Report. Copies of the relevant portions of the legislative text and the SFC Report are also attached.