Pub. 7 2017-2018 Issue 1

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S July • August 2017 11 equity awards were significantly pared back and may not have caught back up with the industry’s rising profit margins, these economics couldresult inanartificially low3xsafeharboramount (based on the calculation of the average 1x base amount for the 5-year look back period), which in turn would result in high "ex- cess" parachute payments subject to excise taxes and deduction losses in M&A transactions. Types of Payments Subject to 280G 280G captures a wide array of CIC-related payments. Trans- action bonuses, severance payments and retention bonuses are subject to 280G, as well as various time and performance based incentive equity compensation that accelerates upon a CIC (in- cluding stockoptions, restrictedstock,RSUs, SARs, andphantom stock). Given the inclusion of equity accelerations, the 3x safe harbor amount is more likely to be exceeded, resulting in excess parachute payments. 280G Conclusion 280G golden parachute payment rules can be complicated to navigate, but there are some opportunities to ameliorate the adverse impact of 280G on both the recipient and the corpora- tion with advance planning. Boards and key personnel should review all CIC-related agreements and compensation plans to ensure they do not contain any unintended tax consequences and that the treatment of 280G across all applicable documents is consistently applied. In addition, there are various 280G rules of which banks should be aware that apply to public and private companies differently and that may be a benefit or detriment to your bank’s executive compensation planning. Please look in the next issue to Part II of this series govern- ing IRC Section 409A Non-Qualified Deferred Compensation Plans.  If the total parachute payments do exceed the 3x safe harbor amount, then all payments over the 1x base amount are “excess” parachute payments subject to the 20% excise tax and deduction loss.