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The following is not meant to be legal advice.

On February 8, 2007, the Internal Revenue Service (“IRS”) issued Announcement 2007-18 (the “Announcement”).  The Announcement implements a compliance resolution program for employers whose employees exercised stock options or stock appreciation rights during 2006 that did not comply with the requirements of Section 409A of the Internal Revenue Code of 1986.  

The program is available for the exercise of stock options with exercise prices less than the fair market value of the stock on the date of grant and stock appreciation rights that provided for compensation in excess of the increase in fair market value of the stock between the date of grant and the date of exercise.  The Announcement requires that the maximum amount of potential tax under Section 409A be paid to participate in the program.