Direct answer
The claims path is in the denied severance guide , the state lines in the state map , the W-2 year in the W-2 timing guide , and the offsets in the offset guide . The comp archive is in the records guide .
Updated November 9, 2026 · Reviewed against IRS — tax guidance
Executive severance crosses the 280G wall: disqualification structure, double triggers, fee lines, and structured trades decide the net. The acquisition package audit is the check before signing (see the base math in the 280G guide).
The Cross Lines
- Disqualification: reasonable compensation for post-signing services, non-competes, and work bonuses sit outside the parachute base; structure the package on exempt lines (see the structure guide).
- Double triggers: change + termination pays full acceleration; single triggers pay less, and the package paper says which (see the equity trades guide).
- Fees & structured: attorney fees enter the base in some plans; structured payouts stack discount lines and annuity taxes (see the fee rules guide and the discount guide).
The claims path is in the denied severance guide, the state lines in the state map, the W-2 year in the W-2 timing guide, and the offsets in the offset guide. The comp archive is in the records guide.
Put the rule into action
Write the letter with the free Severance Package Negotiation Letter generator. The state pages carry the local payout and notice windows, and the application tracker keeps the follow-up date in writing.
Put the rule into action
The Base Amount, Step By Step
Direct answer: 280G only bites when a change of control happens and your separation money exceeds three times your base amount. The base amount is built from five years of compensation history, so the first thing to do is get that history in writing, not guess it. Above the threshold, the excess is called a parachute payment: the company loses its deduction and you pay a 20% excise tax on top of ordinary income tax.
- Pull your W-2s for the five lookback years, including bonuses, restricted stock income at vesting, and any payments from subsidiaries or predecessors. The Form W-2 entry explains why a severance line can land in the wrong year and skew the average.
- Ask the deal team or the plan sponsor for the base amount calculation in writing. Executive packages are modeled before they are offered; the model is a document you can request.
- Compare the total separation value against three times the base. Use the Severance Package Calculator for the tenure math and hold the parachute comparison beside it.
- Identify the excess. That number is what every structuring idea below is trying to shrink.
The Exempt Lines Worth Negotiating
Not every dollar counts toward the parachute. The exempt categories are where a competent negotiator and counsel can change the net without asking the company for more money.
- Reasonable compensation for post-signing services. A real non-compete, confidentiality obligations, consulting, or transition services priced at a reasonable value can sit outside the base. The consideration must be genuine work, documented with dates and deliverables, not a label pasted onto severance.
- Payments for a release of claims are valued separately. A release that gives up genuine claims can be allocated and supported with documentation rather than assumed.
- Safe-harbor non-competes. Value set aside for refraining from competition is treated under its own formula, so the scope, duration, and geography in your agreement should match what the model assumes.
- Cutback clauses. Some plans reduce the payment to stay under the threshold, either before-tax or after-tax. Read which one applies before you assume a bigger offer is simply better; see the golden parachute entry.
- Shareholder ratification. For some companies, a disclosed shareholder vote can remove the excise tax for the recipient while the deduction question stays open. It is a board-level path, so ask whether it is planned.
Trigger Language And The Pre-Signature Audit
Deal documents decide whether the parachute even exists. A single trigger pays acceleration on the transaction alone; a double trigger requires both the transaction and your termination. If your equity award is double-trigger and you are terminated before closing, the acceleration may never fire, and the 280G analysis changes entirely.
- Read the award agreement for the trigger definition, the acceleration percentage, and the treatment of unvested units on a termination near closing.
- Confirm the transaction date and your termination date in writing. Days decide which tax year and which rule set applies.
- Ask whether a change of control resets vesting or merely accelerates it, and whether the exercise window moves with the transaction.
- Have counsel run the parachute math once, in writing, before you counter. For an executive package this is the highest-value hour in the whole negotiation; send your asks with the Severance Package Negotiation Letter generator after the model is in hand.
| Line | Effect On The Parachute | What To Verify |
|---|
| Standard severance weeks | Counts toward the parachute total | Weeks, pay rate, and reporting year |
|---|
| Priced non-compete | Can sit outside the parachute | Scope, duration, geography, reasonableness |
|---|
| Post-signing consulting | Can sit outside the parachute | Deliverables, dates, and actual performance |
|---|
| Equity acceleration | Counts unless the trigger never fires | Single or double trigger, closing date |
|---|
| Cutback clause | Reduces the payment at the threshold | Before-tax or after-tax mechanic |
|---|
| Shareholder ratification | Can remove the excise tax | Whether a vote is planned and disclosed |
|---|
For the current text behind these numbers, start with the New York Severance Offset rule page and the New Jersey Severance Offset rule page, along with the Severance Pay definition and the severance layoff math guide hub. Those sources state the rule in full; this page only points at them.
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Frequently Asked Questions
- When do the golden parachute rules actually apply?
- Only when a change of control occurs and the separation payments tied to it exceed three times your base amount. A layoff with no transaction does not trigger 280G, no matter how large the package is. Confirm whether a sale, merger, or acquisition is in motion before you model anything.
- Who pays the excise tax on a parachute payment?
- You do. The recipient pays the excise tax on the excess parachute amount in addition to ordinary income tax, and the company loses the deduction on that same excess. That shared cost is why structure, not just total size, drives the negotiation.
- Can severance be moved outside the parachute calculation?
- Sometimes. Compensation for genuine post-signing services, separately valued releases, and safe-harbor non-compete promises can be excluded when the agreement documents the real consideration. Labels without supporting obligations do not change the math.
- Does a double trigger change my equity outcome?
- Yes, materially. Double-trigger awards accelerate only if the transaction happens and you are terminated within the window. Timing your separation relative to closing changes both acceleration and the parachute total, so get both dates in writing.
The 280G base is set from five years of compensation history, and the cutback clause is plan language. Confirm the calculation in writing, and confirm the offset weeks and the pay window that ride with the package with the state agency named on the state rule pages before signing, because the label and the schedule change both the tax line and the benefit weeks. The severance math runs in the severance calculator.
Sources (official record — verify before filing)
IRS — tax guidance