IRS allows Paulson to sell stock holdings
By
MARTIN CRUTSINGER, AP Economics Writer
Fri Jun 30, 7:07 PM ET
The
Internal Revenue Service issued a regulation Friday that will allow its
new
boss, incoming Treasury Secretary Henry Paulson, to sell his extensive
Goldman Sachs stock holdings without incurring a tax penalty.
The
IRS guidance clarifies that any executive who is divesting a deferred
compensation arrangement to comply with government conflict-of-interest
rules
does not have to pay a 20 percent penalty that Congress imposed in a
2004 law.
Treasury spokesman Sean Kevelighan said that the IRS had been
working on the
new tax guidance but accelerated that effort so it could be
released in time
to cover Paulson.
Kevelighan said that before
Paulson was nominated by President Bush in May to
succeed John Snow, the
IRS had not made writing the new rule a priority
because it covered so few
people.
"But when the caliber is raised to the secretary of the
Treasury, it does
make sense to accelerate it a bit," he
said.
Congress in 2004 passed legislation that slapped a 20 percent tax
penalty on
executives who accelerate payments from certain deferred
compensation plans.
It was designed to punish executives who cashed out of
such plans early.
These plans have enjoyed growing popularity among U.S.
corporations because
they allow companies to boost the pay of their top
executives by awarding them
extra cash or stock and stretching the payments
out over time to lessen the
tax consequences.
The new IRS rule
clarifies that any executive who has been nominated for a
public office can
accelerate payments under the deferred compensation plans and
avoid the 20
percent penalty so long as the payments are being made to comply
with
conflict-of-interest rules.
The IRS felt it needed to issue the new rule
to clarify ambiguity in the law
that Congress passed.
Kevelighan
said that Paulson will still have to pay regular income taxes on
the
deferred compensation but he will avoid paying the 20 percent
penalty.
The White House announced last week that Paulson will sell all
of his
holdings in Goldman Sachs including stock options he holds that have
not yet vested
to comply with conflict-of-interest rules.
Paulson,
who worked for Goldman Sachs for 32 years, owns 3.23 million shares
of
stock, which would be worth around $480 million. His total net worth has
been estimated to be above $700 million.
Paulson was picked by Bush
to succeed Snow in hopes he would be a more
effective proponent of the
administration's economic program. He won Senate approval
on Thursday and
is expected to be sworn in as the nation's 74th Treasury
secretary sometime
next week.
___
On the Net:
Treasury Department:
http://www.ustreas.gov/
___
Associated
Press Tax Writer Mary Dalrymple contributed to this
story.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Senate
Finance Committee
SUBCOMMITTEE ON TAXATION AND IRS OVERSIGHT
Jon Kyl, AZ,
Chairman
James M. Jeffords, VT, Ranking
Member
Republicans
Trent Lott, MS
Orrin Hatch,
UT
Olympia J. Snowe, ME
Mike Crapo, ID
Craig Thomas, WY
Rick
Santorum, PA
Democrats
Max Baucus, MT
Kent Conrad,
ND
Blanche L. Lincoln, AR
Charles Schumer, NY
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