Tax Executives Institute-U.S. Treasury Department liaison meeting minutes.

March 11, 2010

On March 11,2010, a delegation from Tax Executives Institute met with Michael Mundaca, Assistant Secretary of the Treasury for Tax Policy-designate, and other representatives of Treasury Department's Office of Tax Policy. These following minutes were prepared by Tax Executives Institute, and although reviewed by the Office of Tax Policy, they have not been formally approved by the Treasury Department.

Introductory Comments

On behalf of the U.S. Treasury Department's Office of Tax Policy, Deputy Assistant Secretary for Tax Policy Emily S. McMahon welcomed TEI President Neil D. Traubenberg and the other members of the delegation from Tax Executives Institute to the liaison meeting. Ms. McMahon said that she was pleased to meet with TEI, adding that it was important for the Department to hear what issues are on the business community's mind. Assistant Treasury Secretary-designate Michael F. Mundaca joined the meeting shortly.

The delegations for the Treasury Department and TEI are set forth below.

Department of Treasury Delegation

Michael F. Mundaca, Assistant Secretary (Tax Policy)

Emily S. McMahon, Deputy Assistant Secretary (Tax Policy)

Stephen E. Shay, Deputy Assistant Secretary--International Tax Affairs

J. Mark Iwry, Senior Advisor to the Secretary and Deputy

Assistant Secretary (Retirement and Health Policy)

Joshua D. Odintz, Acting Tax Legislative Counsel

George H. Bostick, Benefits Tax Counsel

Manal S. Corwin, International Tax Counsel

Michael Caballero, Deputy International Tax Counsel

Stephen Tackney, Senior Division Counsel, Tax Exempt/Government

Entities Division, Internal Revenue Service (on secondment to the Office of Tax

Policy)

TEI Delegation

Neil D. Traubenberg, TEI International President

Paul O'Connor, Millipore Corporation, TEI Senior Vice President

David M. Penney, General Motors of Canada Limited, TEI Secretary

Carita R. Twinem, Briggs & Stratton Corporation, TEI Treasurer

Michael J. Bernard, Microsoft Corporation, TEI Executive Committee

Paul Heller, Royal Bank of Canada, TEI Executive Committee

Lynn B. Jordan, Performance Food Group Company, TEI Executive Committee

Janice L. Lucchesi, Akzo Nobel, Inc., TEI Executive Committee

Kelly A. Nall, Hewlett-Packard Company, TEI Executive Committee

Daniel R. Goff, Xilinx, Inc., Chair, TEI International Tax Committee

John A. Mann, Walgreen, Inc., Chair, TEI Federal Tax Committee

Mark C. Silbiger, Lubrizol Corporation, Chair, TEI IRS Administrative Affairs

Committee

Timothy J. McCormally, TEI Executive Director

Eli J. Dicker, TEI Chief Tax Counsel

Mary L. Fahey, TEI General Counsel

Jeffery P. Rasmussen, TEI Tax Counsel

Daniel B. De Jong, TEI Tax Counsel

Regulatory Actions and Other Initiatives: Section 457A

Section 457A of the Internal Revenue Code applies to any compensation that is deferred under a nonqualified deferred compensation (NQDC) plan of a "nonqualified entity," and requires that such compensation be included in gross income when there is no longer a substantial risk of forfeiture. Originally targeted at off-shore hedge fund managers, the final statute applies more broadly, for example, potentially applying to any U.S. taxpayer receiving deferred compensation from a foreign employer or to a nonresident alien with an existing deferred compensation arrangement who becomes a U.S. resident for U.S. federal income tax purposes.

Mr. Bostick stated that the Institute's agenda provided a good summary of the issues relating to section 457A, calling it one area where benefits and international tax concepts intersect. Stating "we feel your pain" about the complex nature of the statute, he expressed interest in finding ways to lighten its administrative burden on taxpayers. He referred to TEI's recommendation that de minimis rules be adopted, asking for the logic behind the suggestion of such a rule relating to situations in which less than a specified percentage of an employer's workforce participates in the NQDC plan.

Ms. Lucchesi explained that U.S. companies cannot assume that their U.S. expatriates are protected from falling within the restrictions of section 457A if they remain in a U.S.-sponsored plan. If a U.S. expatriate is, in fact, employed by the foreign affiliate, that person is treated as if he or she were in a foreign plan and subject to section 457A. She suggested that de minimis rules be adopted providing that the statute would not apply if, for example, one percent...