IRS Says - Heads Up On Executive Compensation

01/26/04
CRI

UPPER SADDLE RIVER, NJ, January 26, 2004 – With the ever changing economy, corporations now have yet another thing to worry about regarding Executive Compensation. The Internal Revenue Service (IRS) announced in the fourth quarter of 2003 that in the future, it would start auditing the Executive Compensation practices of companies. The IRS will focus on deferred compensation, equity compensation, family limited partnerships, and fringe benefits. In addition, the IRS also plans to focus on corporate tax deductions to verify if they are consistent with compensation reported by executives.

Some of the key areas of concern are:

v      Company car use
v      Relocation benefits
v      Corporate jet use
v      Section 162 (m)
v      Golden parachutes

Based on this announcement, the Board of Directors and Compensation Committees need to take action to continually monitor all executive compensation programs. To stay on top of this, Boards and Committees will need to do their due diligence internally, in addition to contacting outside sources to assist with the analysis and/or development of Executive Compensation Programs.