26 USC 457A - Nonqualified deferred compensation from certain tax indifferent parties

U.S Code last checked for updates: Nov 22, 2024

§ 457A.

Nonqualified deferred compensation from certain tax indifferent parties

(a)

In general

(b)

Nonqualified entity

For purposes of this section, the term “nonqualified entity” means—

(1)

any foreign corporation unless substantially all of its income is—

(A)

effectively connected with the conduct of a trade or business in the United States, or

(B)

subject to a comprehensive foreign income tax, and

(2)

any partnership unless substantially all of its income is allocated to persons other than—

(A)

foreign persons with respect to whom such income is not subject to a comprehensive foreign income tax, and

(B)

organizations which are exempt from tax under this title.

(c)

Determinability of amounts of compensation

(1)

In general

If the amount of any compensation is not determinable at the time that such compensation is otherwise includible in gross income under subsection (a)—

(A)

such amount shall be so includible in gross income when determinable, and

(B)

the tax imposed under this chapter for the taxable year in which such compensation is includible in gross income shall be increased by the sum of—

(i)

the amount of interest determined under paragraph (2), and

(ii)

an amount equal to 20 percent of the amount of such compensation.

(2)

Interest

(d)

Other definitions and special rules

For purposes of this section—

(1)

Substantial risk of forfeiture

(A)

In general

(B)

Exception for compensation based on gain recognized on an investment asset

(i)

In general

(ii)

Investment asset

For purposes of clause (i), the term “investment asset” means any single asset (other than an investment fund or similar entity)—

(I)

acquired directly by an investment fund or similar entity,

(II)

with respect to which such entity does not (nor does any person related to such entity) participate in the active management of such asset (or if such asset is an interest in an entity, in the active management of the activities of such entity), and

(III)

substantially all of any gain on the disposition of which (other than such deferred compensation) is allocated to investors in such entity.

(iii)

Coordination with special rule

(2)

Comprehensive foreign income tax

The term “comprehensive foreign income tax” means, with respect to any foreign person, the income tax of a foreign country if—

(A)

such person is eligible for the benefits of a comprehensive income tax treaty between such foreign country and the United States, or

(B)

such person demonstrates to the satisfaction of the Secretary that such foreign country has a comprehensive income tax.

(3)

Nonqualified deferred compensation plan

(A)

In general

(B)

Exception

(4)

Exception for certain compensation with respect to effectively connected income

(5)

Application of rules

(e)

Regulations

(Added Pub. L. 110–343, div. C, title VIII, § 801(a), Oct. 3, 2008, 122 Stat. 3929; amended Pub. L. 115–141, div. U, title IV, § 401(a)(113), Mar. 23, 2018, 132 Stat. 1189.)

cite as: 26 USC 457A