This excerpt taken from the SLE DEF 14A filed Sep 14, 2007.
Federal Income Tax Consequences.
The following is a summary of certain federal income tax consequences of awards made under the PBIP, based upon the laws in effect on the date hereof. The discussion is general in nature and does not take into account a number of considerations which may apply in light of the circumstances of a particular participant under the PBIP. The income tax consequences under applicable state and local tax laws may not be the same as under federal income tax laws.
If an award under the PBIP is paid in cash or its equivalent, a participant will recognize compensation taxable as ordinary income (and subject to income tax withholding in respect of an employee) at the time the award is paid in an amount equal to the cash or the fair market value of its equivalent, and Sara Lee will be entitled to a corresponding deduction. It is intended that the deduction limits of Section 162(m) of the Code will not apply to payments under the PBIP. If, in accordance with the exercise of Committee discretion, a portion or all of an award under the PBIP is paid to a participant in stock, restricted stock, stock options, or other stock-based or stock-denominated units, pursuant to Sara Lees equity compensation plans, the federal income tax consequences of such payment will be dependent upon the particular features of such awards.
Section 162(m) of the Code limits the deductibility of certain compensation of the Chief Executive Officer and the next three most highly compensated officers of publicly-held corporations other than the Chief Executive Officer and the Chief Financial Officer. Compensation paid to such an officer during a year in excess of $1.0 million that is not performance-based (or does not comply with other exceptions) would not be deductible on the companys federal income tax return for that year. It is intended that compensation attributable to awards payable under the PBIP will qualify as performance-based compensation.
The foregoing general tax discussion is intended for the information of stockholders considering how to vote with respect to this proposal and not as tax guidance to participants in the PBIP. Participants are strongly urged to consult their own tax advisors regarding the federal, state, local, foreign and other tax consequences to them of participating in the PBIP.