The Careful Employer: Taxpayer Guidance Under the All Events Test and Revenue Ruling 2011-29

Employee bonus plans tying an employee's personal gain to a company's well-being can improve company retention and morale, but as a tax matter have posed particular timing problems for both employers (as taxpayers) and the Service. For many years, a combination of "inconsistent judicial decisions and conflicting positions" by courts and the Service provided contradictory guidance on the appropriate treatment of accounting and tax deductions for bonus payments for taxpayers. Revenue Ruling 2011-29 has brought needed clarity to this situation, although not providing complete closure concerning the Service's position. The Revenue Ruling holds that an accrual method taxpayer can and must establish the 'fact of the of the liability' under section 461 for a minimum amount of bonuses payable to a group of employees during that taxable year. This comment argues that despite not fully explaining past conflicting guidance by the Service, Revenue Ruling 2011-29 brings the Service's treatment of bonus plans in line with decades of case law.