Monthly LRA Update

JUDICIAL DEVELOPMENTS

Athene v. American General, et al. – SVP Litigation Update

On July 1, co-defendant ZC Resources Investment Trust submitted its answer to Athene’s complaint (document available here). Throughout July, the parties appear to have commenced the production of documents and discovery.

TAX DEVELOPMENTS

IRS Proposed Regulations on Tax-Exempt Organization Excess Executive Compensation

On June 11, the IRS released proposed regulations under IRC § 4960, which imposes an excise tax on remuneration in excess of $1,000,000 and any excess parachute payment paid by an applicable tax-exempt organization to any covered employee.

Not surprisingly, for purposes of this excise tax, the proposed regulations include any amounts factored into gross income as compensation for services pursuant to a below-market loan. One instance where such below-market loans arise is in certain split-dollar life insurance arrangements.

We do not expect this development to have any impact on bank-owned or corporate-owned life insurance programs, as the excise tax under IRC § 4960 only applies to “covered” employees of tax-exempt organizations.

The comment period runs through August 10.