Emergency Economic Stabilization Act of 2008 Limits Executive Compensation and Offshore Deferrals

On October 3, 2008 President Bush signed into law the Emergency Economic Stabilization Act of 2008 (the Act). The Act, among other things, (i) institutes the Troubled Asset Relief Program (the TARP), which authorizes the Treasury Department to purchase or insure a financial institution’s troubled assets; (ii) adds section 457A to the Internal Revenue Code (IRC), which largely eliminates the ability of taxpayers to defer compensation that is received from entities located in certain non-U.S. jurisdictions; and (iii) makes various adjustments to the application of the alternative minimum tax (the AMT). In addition to the Act, on October 14, 2008, the Internal Revenue Service (IRS) issued IRS Notice 2008-94, which clarifies certain provisions within the TARP that relate to institutions that elect to participate in this program. The impact of each of these three provisions is summarized below in Sections 1, 2 and 3, respectively.

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