Parachute Strategies Save Employee Taxes, Employer Deduction, Practitioners Say

Overview


Andrew Liazos told a webcast focused on executive golden parachute plans that ways to avoid negative tax impact for them include “capping the payment at the statutory level to avoid triggering the excise tax or cutting back the payment to save taxes for the executive and save the company a significant tax deduction.” Mr. Liazos added that, “Tax code Section 280G on golden parachute payments comes into play when payments are made to certain executives, contingent on a change in control, that equal or exceed three times the executive’s base amount, generally defined as the individual’s average compensation for the last five years preceding the change in control.” He cautioned that some approaches may not work in every situation, adding that the best after-tax provisions allow for a cutback to avoid the 20 percent tax, but only if the employee would be better off after-tax with a cutback instead of receiving the full amount.