This excerpt taken from the CMC DEF 14A filed Dec 8, 2006.
Federal Income Tax Consequences
The following is a brief summary of certain federal income tax consequences relating to the awards under the 2006 Equity Plan as set forth below. This summary does not purport to address all aspects of federal income taxation and does not describe state, local or foreign tax consequences. This discussion is based upon provisions of the Code and the treasury regulations issued thereunder, and judicial and administrative interpretations under the Code and treasury regulations, all as in effect as of the date hereof, and all of which are subject to change (possibly on a retroactive basis) or different interpretation.
Tax Consequences to Participants
The recipient of cash will be subject to tax at ordinary income rates on the amount of the award on the date of payment or delivery.
Federal Tax Withholding
Any ordinary income realized by a participant upon receipt of cash is subject to withholding of federal, state and local income tax and to withholding of the participants share of tax under the Federal Insurance Contribution Act. Deferred compensation that is subject to Section 409A of the Code may be subject to certain federal income tax withholding and reporting requirements.
Tax Consequences to the Company or Subsidiary
To the extent that a participant recognizes ordinary income, the Company will generally be entitled to a corresponding deduction.
Other Tax Matters
If a participants rights under the 2006 Cash Plan are accelerated as a result of a change in control (as defined in the 2006 Cash Plan) the participant may be subject to (i) the imposition of a 20% federal excise tax (in addition to federal income tax) payable by the participant on the value of such accelerated rights, and (ii) the loss by the Company of its compensation deduction.
In 2004, Section 409A was added to the Code to regulate all types of deferred compensation. If the requirements of Section 409A are not satisfied, deferred compensation and earnings thereon will be subject to tax, plus an interest charge and a penalty tax. To the extent the 2006 Cash Plan is subject to and does not comply with Section 409A of the Code with respect to any award of incentive compensation, the 2006 Cash Plan may be amended to the extent necessary.