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Fixing Section 409a: Legislative And Administrative Options, Gregg D. Polsky

Scholarly Works

This symposium contribution to the Villanova Law Review describes the legislative calamity that is section 409A of the Internal Revenue Code. Section 409A manages, all at once, to (i) fail to better neutralize the tax treatment of deferred compensation with that of current compensation, (ii) impose significant compliance costs on sophisticated taxpayers, and (iii) provide a dangerous trap for unsophisticated taxpayers.

Ideally, Congress should repeal section 409A and replace it with a system that taxes deferred compensation more neutrally vis-a-vis current compensation. Failing that, Congress should either replace section 409A with a broad grant of authority to the Treasury and …