Section 280G/409A Change-In-Control Event Comparison Chart

Summary

The chart that follows compares the definitions of the three change-in-control (CIC) events set forth in sections 280G and 409A of the Internal Revenue Code (I.R.C.). I.R.C. § 280G generally disallows certain entities a deduction, and imposes on certain individuals a 20% excise tax, for any so-called excess parachute payment paid or accrued with respect to any of three change-in-control events defined in 26 C.F.R. § 1.280G-1. By comparison, I.R.C. § 409A generally imposes on persons providing services (service providers) the inclusion in income of, and a 20% excise tax (as well as an increased interest rate on unpaid taxes) on, NQDC paid or payable upon impermissible events—including change-in-control events that do not meet Section 409A's minimum requirements for defining such events under 26 C.F.R. § 1.409A-3. It is essential that practitioners understand the differences between the change-in-control event definitions and related requirements under Sections 280G and 409A, respectively, when negotiating any aspect of a business transaction that may constitute such an event under either (or both) I.R.C. sections.