Payments Do Not Qualify as Performance Based Compensation Under 162(m) Where Payments are Permitted Under a Severance Arrangement

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The Internal Revenue Service published a private letter ruling on January 28, 2008 (PLR 200804004) holding that amounts paid to a recipient under an incentive compensation plan intended to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended, (the ?Code?) will not qualify as performance-based compensation where the recipient?s employment agreement provides for payment of the performance compensation upon a termination of employment without cause or for good reason, whether or not the performance metrics are satisfied.

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