The Wall Street Journal had a good article here discussing the relief provided under Notice 2005-1 (issued yesterday and discussed here) for stock appreciation rights:
Businesses won a victory Monday when the Treasury Department agreed to exempt public companies’ stock appreciation rights from new restrictions on deferred executive compensation plans.The Treasury and Internal Revenue Service said stock appreciation rights will have “limited exceptions” from new rules that tighten the tax treatment of deferred compensation programs.
Elizabeth Buchbinder, a partner with Ernst & Young LLP in Washington, said the new rules provide a permanent exception from the new law for certain stock appreciation rights , or SARs, issued by public companies. The exception applies for SARs that are settled in stock and granted at fair market value, she said.
The article goes on to note that the heads of the House and Senate tax-writing committees wrote to Treasury Secretary John Snow last week urging him to consider carving out stock appreciation rights. In addition, according to the article, reaction to the rules issued by Treasury were positive from the author of the tax bill, Senate Finance Committee Chairman Charles Grassley, R-Iowa, who said he looks forward to working with Treasury on the rules, “including the preservation of stock appreciation rights with a belt-and-suspenders approach to prevent abuse.”