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Code · BILL · 113th Congress · H.R. 1 (Introduced in House) — To amend the Internal Revenue Code of 1986 to provide for comprehensive tax reform. · Sec. 3801

Sec. 3801. Nonqualified deferred compensation

1,012 words·~5 min read·/bill/113/hr/1/ih/section-3801

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Subpart A of part I of subchapter D of chapter 1 is amended by adding at the end the following new section: Any compensation which is deferred under a nonqualified deferred compensation plan shall be includible in gross income when there is no substantial risk of forfeiture of the rights to such compensation. For purposes of this section— The rights of a person to compensation shall be treated as subject to a substantial risk of forfeiture only if such person’s rights to such compensation are conditioned upon the future performance of substantial services by any individual.
For purposes of this section: The term nonqualified deferred compensation plan means any plan that provides for the deferral of compensation, other than— a qualified employer plan, any bona fide vacation leave, sick leave, compensatory time, disability pay, or death benefit plan, and any other plan or arrangement designated by the Secretary consistent with the purposes of this section. The term nonqualified deferred compensation plan shall include any plan that provides a right to compensation based on the appreciation in value of a specified number of equity units of the service recipient or stock options.
The term qualified employer plan means any plan, contract, pension, account, or trust described in 408(p)(2)(D)(ii). The term plan includes any agreement or arrangement, including an agreement or arrangement that includes one person. Compensation shall not be treated as deferred for purposes of this section if the service provider receives payment of such compensation not later than 6 months after the end of the taxable year of the service recipient during which the right to the payment of such compensation is no longer subject to a substantial risk of forfeiture.
References to deferred compensation shall be treated as including references to income (whether actual or notional) attributable to such compensation or such income. Except as provided by the Secretary, rules similar to the rules of subsections
(b)and
(c)of section 414 shall apply. Nothing in this section shall be construed to prevent the inclusion of amounts in gross income under any other provision of this chapter or any other rule of law earlier than the time provided in this section. Any amount included in gross income under this section shall not be required to be included in gross income under any other provision of this chapter or any other rule of law later than the time provided in this section. The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including regulations disregarding a substantial risk of forfeiture in cases where necessary to carry out the purposes of this section. . Subpart A of part I of subchapter D of chapter 1 is amended by striking section 409A (and by striking the item relating to such section in the table of sections for such subpart). Section 26(b)(2) is amended by striking subparagraph (V). Section 3401(a) is amended by striking the flush sentence at the end. Section 6041 is amended by striking subsection (g). Section 6051(a), as amended by the preceding provisions of this Act, is amended by striking paragraph (12), by inserting and at the end of paragraph (11), and by redesignating paragraph
(13)as paragraph (12). 457(b) plans of tax exempt organizations Section 457 is amended by adding at the end the following new subsection: This section shall not apply to amounts deferred which are attributable to services performed after December 31, 2014, under a plan maintained by an employer described in subsection (e)(1)(B). Subsection
(f)shall not apply to amounts deferred which are attributable to services performed after December 31, 2014. . Subpart B of part II of subchapter E of chapter 1 is amended by striking section 457A (and by striking the item relating to such section in the table of sections for such subpart). Section 26(b)(2) is amended by striking subparagraph (X). The table of sections for part I of subchapter D of chapter 1 is amended by adding at the end the following new item: Sec. 409B. Nonqualified deferred compensation. . Except as otherwise provided in this subsection, the amendments made by this section shall apply to amounts which are attributable to services performed after December 31, 2014. In the case of any amount deferred to which the amendments made by this section do no apply solely by reason of the fact that the amount is attributable to services performed before January 1, 2015, to the extent such amount is not includible in gross income in a taxable year beginning before 2023, such amounts shall be includible in gross income in the later of— the last taxable year beginning before 2023, or the taxable year in which there is no substantial risk of forfeiture of the rights to such compensation (determined in the same manner as determined for purposes of section 409B of the Internal Revenue Code of 1986, as added by this section). No later than 120 days after the date of the enactment of this Act, the Secretary shall issue guidance providing a limited period of time during which a nonqualified deferred compensation arrangement attributable to services performed on or before December 31, 2014, may, without violating the requirements of section 409A of the Internal Revenue Code of 1986, be amended to conform the date of distribution to the date the amounts are required to be included in income. If the taxpayer is also a service recipient and maintains one or more nonqualified deferred compensation arrangements for its service providers under which any amount is attributable to services performed on or before December 31, 2014, the guidance issued under paragraph
(3)shall permit such arrangements to be amended to conform the dates of distribution under such arrangement to the date amounts are required to be included in the income of such taxpayer under this subsection. Any amendment to a nonqualified deferred compensation arrangement made pursuant to paragraph
(3)or
(4)shall not be treated as a material modification of the arrangement for purposes of section 409A of the Internal Revenue Code of 1986.
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