Extract to table

The portion of equity acceleration that constitutes a "parachute payment" under Section 280G must be determined using the methodology prescribed by Treasury Regulation Section 1

Because the gross-up payment itself is taxable income to Harding, the gross-up must be sufficient to cover not only the excise tax but also the income taxes on the gross-up

The valuation must be documented contemporaneously and should be in place before the CIC event to provide maximum defensibility against IRS challenge

Section 409A Considerations While the primary focus of this memorandum is Section 280G, it is important to note that CIC severance payments must also comply with Section 409A of the Internal Revenue Code, which governs the taxation of nonqualified deferred compensation

If the CIC severance is not paid within the short-term deferral period, it will be subject to Section 409A and must comply with the statute's timing and form-of-payment requirements

Under Section 409A(a)(2)(B)(i), payments of deferred compensation made to a "specified employee" of a publicly traded company upon separation from service must be delayed for six months following the date of separation