What is a highly compensated individual for 280G?

For purposes of paragraph (2), the term “highly-compensated individual” only includes an individual who is (or would be if the individual were an employee) a member of the group consisting of the highest paid 1 percent of the employees of the corporation or, if less, the highest paid 250 employees of the corporation.

What is the 280G rule?

Section 280G of the Internal Revenue Code is intended to discourage excessive compensation (sometimes referred to as “golden parachute payments”) to certain officers, highly compensated individuals, and greater than 1% shareholders (called “disqualified individuals”) of a corporation undergoing a change in control.

What triggers a 280G?

280G is triggered when any disqualified individual receives parachute payments in excess of three times this base amount. Where 280G is triggered, the excise tax and deduction disallowance apply to the payments in excess of the base amount, not just the payments in excess of the three times base amount threshold.

What is 280G base amount?

The 280G Base Amount & Safe Harbor Threshold A DI’s base amount is equal to the average annual compensation for services performed that would have been includible in gross income for the five taxable years preceding the change in control. – In most cases, this amount is commensurate with Box 1 of the DI’s Form W-2.

How is 280G calculated?

If Section 280G is triggered, the amount of a disqualified individual’s total “excess parachute payments” generally will equal the amount of all of the individual’s compensatory payments that are contingent on the acquisition, minus the individual’s “base amount” (i.e., one times the individual’s base amount, not three …

Does section 280G apply to private companies?

As stated above, Sec. 280G applies to C corporations — either public or private.

How do I get around 280G?

There are three primary approaches to avoiding, mitigating or offsetting Section 280G liability: (i) if it is a non-public corporation, relying upon the shareholder vote exception; (ii) reducing the amounts payable to the disqualified individual to one dollar less than the amount that would trigger the excise tax ( …

What is a 280G disclosure statement?

A disclosure or information statement to be distributed to all holders of record in a corporation that seeks to ratify parachute payments under Section 280G of the Internal Revenue Code’s Shareholder Approval Exception.

Who is subject to 280G?

Section 280G applies only to “disqualified individuals.” Disqualified individuals generally are employees (or independent contractors) who, at any time during the 12-month period prior to and ending on the closing date of the acquisition, have been officers of the corporation, shareholders owning more than 1% of the …

How can I avoid 280G excise tax?

What is 280G value?

The Section 280G “value” of acceleration of vesting of stock options, restricted stock awards, and other equity- based awards in connection with the acquisition.

Who are disqualified individuals 280G?