Performance Based Compensation is Non-Excludible Under 162(m) If Also Payable Under An Employment Agreement As Severance

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Update of our February 8, 2008 Client Alert:

We alerted you on January 31, 2008 (and provided a further update on February 8, 2008), that the IRS now takes the position that compensation intended to qualify as deductible performance-based compensation pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended, will not qualify if 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 (See PLR 200804004).

Please see full update for more information.

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Tax

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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