IRS Extends Effective Date of 409A

The IRS has issued Notice 2006-79 which delay the effective date of the Proposed Regs under Section 409A until January 1, 2008 (and subsequently again until January 1, 2009, as seen here.) and by generally extending earlier transitional relief. This provides taxpayers additional transitional relief to come into compliance with forthcoming final regs.

Options granted before 2008 won't be considered as violating 409A as long as it is operated in reasonable, good faith compliance with 409A and guidance with effective date before 2008. Although not obligatory, compliance with either final or proposed before regs' effective date will constitute good faith operation. IRS noted that this guidance isn't intended to limit scope or applicability of earlier transitional relief.

The actual notice can be seen at http://www.irs.gov/pub/irs-drop/n-06-79.pdf

For questions or comments, please feel free to contact Jeff Faust at (510) 797-8661 x249 or jfaust@groco.com

For more information go to:

409A Valuation Issues Q&A
Notice 2006-4 Valuation Issues