Tax Dispute Resolution Quarterly

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Private equity funds liable for unfunded pension liability By Jeanne Sullivan, Karen Field, and Deborah Fields, Washington National Tax In a recent federal district court decision, two private equity funds that owned a bankrupt company were treated as being in a single deemed partnership engaged in a trade or business that had common control of the bankrupt company for purposes of imputing liability for unfunded pension obligations. At a minimum, the case potentially affects the exposure of a fund for pension obligations of a portfolio company. Moreover, the court’s analysis in the case could be invoked by others, such as the IRS or the courts, to disregard a taxpayer’s organizational formalities and create deemed partnerships that could result in unanticipated tax consequences beyond the funding of pension plan liabilities. An April KPMG report discusses how, unless modified on appeal, the decision may affect future structuring and due diligence for private equity investments. Application of SECA to service LLCs and LLPs By Jeanne Sullivan, Karen Field, and Kelli Cacciotti, Washington National Tax, and Danchai Mekadenaumporn, Global Mobility Services The tax regime of the Self Employment Contributions Act (SECA) applies to net income derived from self-employment—including by partners in partnerships and limited liability partnerships (LLPs), members in limited liability companies (LLCs), and sole proprietors. An entity may not realize that LLC or LLP members are subject to SECA. In the professions of health, law, consulting, accounting, and other specialized fields, individuals may be subject to SECA if they are members of a “service partnership” that is an LLC or LLP—even if they only occasionally provide services to the entity. This May 2016 KPMG LLP report reviews the guidance in this area and provides examples for distinguishing when certain service partnership members may be exempt from SECA. Incentive stock options—Navigating compliance requirements By Gary Cvach and Terri Stecher, Washington National Tax Startup companies, especially in the high tech industry, frequently grant incentive stock options to employees. In recent years, companies have modified their incentive stock option plans due to intense competition for employees. This May 2016 KPMG LLP article discusses two common changes—early exercises and extensions of exercise periods—and the tax ramifications of these changes. © 2016 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 568452
Golden parachutes By Compensation and Benefits Services, Washington National Tax How much will a severance plan really cost? In a change-in-control context, potential payments made to executives can be very expensive—in more ways than the obvious. Parachute payments, defined by the Code 1 and associated regulations to be any payment made upon a change in control other than “reasonable compensation,” can have a hefty associated tax penalty. If an executive’s change-in-control compensation package falls afoul of section 280G, not only is that executive subject to a 20-percent excise tax, but the company will lose the associated deduction for that compensation. What’s more, the payments subject to the golden parachute excise tax may be far more extensive than expected. The regulations sweep in not just lump-sum amounts paid to executives upon a change in control but also continuation of benefits, equity cash-outs, accelerated vesting of equity awards, and more. Conversely, the potential exceptions to what may count as a parachute payment can create situations in which similar-seeming equity awards may be assigned different values in a calculation. Thus, golden parachute calculations have the potential to be a minefield for employers and executives alike. 1 Unless otherwise indicated, references to “section” or “sections” are to the Internal Revenue Code of 1986 (the Code) or to the applicable U.S. Treasury Department regulations (the regulations). © 2016 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 568452
Page 1 and 2: Tax Dispute Resolution Quarterly Gl
Page 3 and 4: Contents Spotlight on compensation
Page 5: Spotlight on compensation and benef
Page 9 and 10: FBAR reporting: Changes are in the
Page 11 and 12: Tax enforcement trends Envisioning
Page 13 and 14: New law creates new risks for partn
Page 15 and 16: A conversation with Greg Matson—E
Page 17 and 18: 2016 webcast series Around the worl
Page 19 and 20: Country by country, step by step: I
Page 21 and 22: © 2016 KPMG LLP, a Delaware limite

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