Committee Reports

Letter to the IRS commenting on Notice 2010-6 (Correcting Documentary Failures Pursuant to Section 409A) (May 2010)

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REPORT

By first-class mail and e-mail [Notice.comments@irscounsel.treas.gov]

Internal Revenue Service
CC:PA:LPD:RU (Notice 2010-6)
Room 5203, P.O. Box 7604
Ben Franklin Station
Washington, DC 20044

Re: Notice 2010-6

Ladies and Gentlemen:

The Committee on Employee Benefits and Executive Compensation of the New York City Bar (the “Committee“)[1] is composed of attorneys with diverse perspectives on employee benefits issues, including members of law firms and counsel to corporations. We commend the Treasury Department (“Treasury“) and the Internal Revenue Service (the “Service“) for issuing Notice 2010-6, 2010-3 I.R.B. 275 (Jan. 5, 2010)(the “Notice” or “Notice 2010-6“), which gives taxpayers the opportunity pursuant to the program establish by the Notice (the “Program“) to correct documentary failures regarding Section 409A of the Internal Revenue Code oof 1986, as amended (“Section 409A“). We write to respond to the request by Treasury and the Service for comments regarding other document failures that commonly occur and methods to correct them and to urge Treasury and the Service to revise the Program in certain respects.

As practitioners who deal with the requirements of Section 409A in many different settings and situations, we can report that a determination of whether a complex modern compensation arrangement[2] is exempt from or meets the requirements of Section 409A has been a consistent challenge. Accordingly, we commend the decision of Treasury and the Service to give taxpayers the opportunity to correct inadvertent and unintended documentary failures regarding Section 409A under the program. We believe, however, that elements of the Notice are unnecessarily punitive or restrictive and hope that Treasury and the Service will eliminate or revise them in additional guidance.

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Footnotes

[1] This letter was prepared by an ad hoc committee of the Committee on Employee Benefits and Executive Compensation of the New York City Bar chaired by Arthur F. Woodard, the other members of which were David Gallai, Kenneth J. Laverriere and Ian L. Levin (Adjunct Member of the Committee).

[2] While we appreciate that Treasury and the Service have informally recommended to practitioners that compensation arrangements be simplified in order to more easily satisfy the requirements of Section 409A, based on our collective experiences, our Committee does not believe that this is a viable alternative in all cases.