The Massachusetts legislature’s recent approval of a comprehensive non-competition reform bill includes significant restrictions for employers seeking to impose non-compete obligations on Massachusetts workers. The Massachusetts Noncompetition Agreement Act will become effective on October 1, 2018, leaving little time for employers to consider what actions to take to protect their business interests.
During the previous quarter, the SEC acted to expand the number of companies that may rely on the “smaller reporting company” scaled disclosure regime and Congress directed revisions to the Regulation A+ and Rule 701 exemptions. The SEC also took enforcement action on a major cybersecurity breach, reinforcing its recent interpretive guidance on the subject. The director of the SEC Division of Corporation Finance also spoke on how blockchain assets may or may not constitute securities, and the 9th Circuit created a circuit split related to securities litigation after a tender offer.
Andrew Liazos said that it makes sense for companies to consider Q-SERPs in response to the end of the performance-based pay deduction, but he questioned whether the plans would offer much “bang for your buck.” “You first have to deal with the obvious time and effort you have to spend to show it’s not discriminatory, and then take a certain level of risk that the rules aren’t going to change,” he said.
Originally published in Tax Notes Today, July 2018.
The Director of the SEC’s Division of Corporation Finance William Hinman gave a speech in which he discussed whether a digital asset originally offered as a security can become something other than a security over time. The speech provided some of the most important considerations to date for analysis of blockchain token transactions under US securities law.
Andrew Liazos and David Fuller identify the three main areas to focus on in light of 162(m) and discuss traps for the unwary.
Executive compensation for the health care industry is always an important topic for the board, made even more critical by the provisions of the Tax Cuts and Jobs Act and recent governance trends. We’re joined by two of the leading health care industry voices on executive compensation practices: Tim Cotter of Sullivan, Cotter and Associates, and McDermott partner Ralph DeJong.
US tax reform is changing the game with respect to many of the popular benefits employers have traditionally provided to their employees. These new rules have produced a great deal of questions. However, while the Internal Revenue Service (IRS) is formulating guidance, employers are left to navigate these changes on their own in order to determine the impact on both themselves and their employees. Employers are also reevaluating their benefit offerings in light of the new rules. These issues and more were addressed during the 2018 McDermott Tax Symposium on April 24, 2018.
The McDermott panel left the audience with these core takeaways:
- Due to the suspension of their employees’ ability to take many itemized deductions, employers should consider the feasibility of restructuring their compensation arrangements to save income taxes and FICA taxes.
- Certain employers that are public employers, private employers with public debt or non-U.S. employers with ADRs traded on a U.S. market should evaluate their executive pay arrangements to determine whether the grandfathering rules under section 162(m) apply to any compensation and further ensure compliance with the new rules under section 162(m).
- Employers should consider whether they will continue to provide popular benefits such as qualified transportation fringes and employer-provided meals. If employers choose to continue to provide these benefits, they will need to confirm that their systems are updated to reflect the changes in deductibility.
- Employers should begin using the updated Form W-4, if they are not already.
- Employers should encourage their employees to utilize the IRS’ updated withholding calculator to verify that the proper tax amounts are being withheld.
For additional information on these topics and other items addressed by McDermott tax professionals during the symposium, please see the compilation of slides. For additional tax reform resources, please visit McDermott’s Take on Tax Reform.
Last month, Alexander Lee and Maureen O’Brien joined with Rob Wellner from Velocity Global to discuss the tax and employee benefits complications that arise in cross-border transactions. Key points discussed:
- Complex tax structures must be considered and understood
- Transfers of employment may be governed by different statutes in each affected jurisdiction
- Purchasers may not be ready to provide employment, payroll and benefits on the closing date without significant pre-closing work
Allison Wilkerson presented on a panel at the National Center for Employee Ownership (NCEO) Conference. The panel provided an overview of issues impacting compensation matters, as well as decisions affecting privately held companies that are wholly or partially owned by an ESOP. The presentation included an analysis of certain legal requirements and a current view on best practices. Finally, the panelists provided real-life examples of effective compensation programs and decision-making strategies for executive and staff compensation.
Partner Diane Morgenthaler presented at this year’s first Tax in the City® meeting on March 15, 2018. Below is a recap of the key takeaways from the event.
Employee Benefits impacts of federal tax reform:
- Alter procedures to ensure no 2018 employer deduction is taken for qualified transportation fringe benefits, except for bicycle transportation subsidies.
- Alter procedures to ensure no 2018 employer deduction is taken for “entertainment” and its related travel and meal expenses, including sporting events, theatre, golf, and other activities.
- Analyze 2018 financial effect to your employer of any proposed gross ups for loss of moving expense deduction for employer and employee.
- If your employer is a US publicly traded company, a foreign issuer with US publicly traded American Depository Receipts (ADRs), or a private company with US publicly traded debt, then careful legal and financial planning is recommended to try to utilize the grandfather exception to the $1M compensation deduction limit under Code section 162(m).