Washington (November 14, 2017) – The American Institute of CPAs (AICPA) today sent Senator Rob Portman (R-Ohio) a letter supporting his proposed Amendment #3 to the Tax Cuts and Jobs Act. The amendment would repeal certain provisions of the bill, including the nonqualified deferred compensation provision of the Chairman’s mark. Under the provision in the Chairman’s mark, service providers would include nonqualified deferred compensation (NQDC) in income when there is no substantial risk of forfeiture regardless of whether the service provider has received the corresponding cash.
“The AICPA is concerned that the provision could limit economic growth and place U.S. businesses at a competitive disadvantage compared to foreign businesses that utilize NQDC arrangements,” AICPA Tax Executive Committee Chair Annette Nellen, CPA, CGMA, Esq., wrote. “The provision would also interrupt millions of taxpayers’ personal financial plans,” she stated.
Nellen explained that, under the Chairman’s mark, retired individuals would have to include in income an amount attributable to future NQDC payments no later than 2026 without having received the cash, which would create a cash flow deficit and financial burden. “In order for employees and partners to have the ability to pay the tax upon vesting, partnerships would need to advance cash to them, an obligation not considered by the partnership when the NQDC arrangement was established,” she wrote. “A potentially significant depletion of a partnership’s working capital would occur affecting its ability to offer competitive compensation packages, hire new employees, or create jobs.”
Nellen thanked Portman for proposing the amendment. “We appreciate your leadership in recognizing the negative effect of the nonqualified deferred compensation provision in the Chairman’s mark and fully support the amendment to repeal it.”