Banking & Finance Law Report

Tag Archives: IRS

For public companies, the time to update executive compensation practices is now: Final regulations issued under IRC Section 162(m) and American Rescue Plan Act further expands class of covered employees

At long last, the Department of the Treasury and Internal Revenue Service published final regulations to explain how changes to Internal Revenue Code Section 162(m) under the Tax Cuts and Jobs Act of 2017 (TCJA) affect the deductibility (or lack thereof) of compensation in excess of $1 million paid to covered employees.  For the most part, the final regulations did not change any prior guidance.…

Treasury delays April 15 tax filing and payment deadline

On April 15, 2020 we posted an update to this blog, “UPDATE: Additional information released about delayed federal tax filing and payment deadlines.” Click here to read the update.

In response to the COVID-19 pandemic and the increased strain placed on individuals and business taxpayers during this time, the IRS has pushed back certain payment deadlines to ease the burden on taxpayers.

The plan that was published as of this writing, Notice 2020-17 (the “Notice”), impacts any person with a Federal income tax payment due April 15, 2020. The Notice postpones such Federal income tax payments to July 15, 2020, subject to certain limitations.…

Final IRS Regulations Issued on Restricted Stock Grants

Restricted stock grants have been a popular executive compensation component for over a decade now. With a restricted stock grant, the employer gives shares of stock to the employee, but subject to two main conditions. One condition is a vesting condition, which generally requires the employee to remain continuously employed with the employer for a period of years, satisfy performance targets, or both. If the employee fails to satisfy the vesting requirements, the employee forfeits the stock. The other condition is that during the vesting period, the employee is prohibited from selling or otherwise transferring the stock.

Restricted stock is popular because it provides a link between the performance of the company and the compensation of the employee. At the same time, unless a complete disaster occurs, the employee generally is guaranteed of receiving some payment because the compensation is equal to the value of the stock, rather than only the appreciation in the value of the stock. In a turbulent economy, that protection is valued by employees.

With any executive compensation arrangement, however, it is important to consult the tax rules. Generally, the value of the stock to the employee who receives a restricted stock grant is not taxed …

Tax Treatment of OREO

The Internal Revenue Service has recently reversed course regarding federal income tax treatment for banks for certain costs associated with OREOs ("other real estate owned").  The newer guidance should liberalize the ability of banks to take immediate deductions with respect to certain costs associated with OREOS.  The IRS has released a Chief Counsel Memorandum stating that a bank that acquires OREOs through foreclosure or deed-in-lieu with respect to a loan originated by the bank is not considered to acquire the OREO for resale within the meaning of §263A of the Internal Revenue Code (which Code Section requires capitalization of certain costs).  This Chief Counsel Memorandum partially contradicts a memorandum issued last June.

This newer guidance means that, for OREOs acquired under the circumstances addressed in the new memorandum (that is, OREO acquired in connection with a loan originated by the bank), legal fees and other costs incurred to acquire the OREO through foreclosure as well as costs incurred while carrying the OREO prior to sale (including real estate taxes, insurance, repairs, maintenance, capital improvements, and utilities), should be fully deductible either when paid or incurred depending on the bank’s method of accounting.  This is in contrast to the previous guidance …

IRS Releases Additional FATCA Guidance, Although Many Questions Remain

In Notice 2011-34 issued April 8, 2011, the IRS provided supplemental guidance regarding foreign financial account reporting requirements under the Foreign Account Tax Compliance Act (“FATCA”). All businesses that makes payments to foreign financial institutions should be aware of these rules which take effect in 2013.  The recently released supplemental guidance, which is expected to be part of extensive future regulations, clarifies certain withholding, documentation, and reporting requirements under FATCA. Because many questions remain, it is expected that the IRS will continue to release additional FATCA guidance.


Beginning on January 1, 2013, a 30% withholding tax will be imposed on certain U.S. source payments (“withholdable payments”) made to foreign financial institutions (“FFIs”). Withholding will be required on payments made to FFIs that do not enter into an agreement with the IRS to provide information on financial accounts held by certain U.S. persons. FATCA is another weapon in the IRS’s arsenal to track and monitor potentially abusive foreign account strategies, although FATCA applies to legitimate and routine business payments as well.…