Tyco’s Ed Breen is no Derek Jeter…

December 18, 2007

images4.jpegLast month, Derek Jeter got into a bit of trouble with New York State over where the Yankees superstar calls home. The same problem is unlikely to dog Tyco (TYC) Chairman and CEO Ed Breen according to a new disclosure buried in the preliminary proxy that Tyco filed late Friday. Since the footnote was in Enron Beelzebub typeface, I’ve taken the liberty to highlight it here:

In addition, Mr. Breen receives tax assistance payments for New York State and City Income Tax on his Tyco-source compensation pursuant to his employment contract.

It’s the words tax assistance that are new, though by burying it in a footnote in minuscule type, Tyco clearly hopes to make this seem like old news. (Breen’s compensation has already been widely reported with numbers ranging from $24 million to over $40 million). But a quick skim of Breen’s employment contract from 2002 looks to me like this is definitely a new twist. While the 2002 contract calls for a gross-up for state and city taxes, it does so in a decidedly different way:

To the extent that the Executive’s permanent residence is outside of New York and to the extent that the Executive becomes subject to New York City or New York State taxes because of temporary assignment or other performance of his duties, the Company shall gross-up the Executive for tax purposes so that he is in the same position as if he were not subject to such taxes.

Remember that Tyco is technically based in Bermuda, which various studies say saves the company billions in taxes, but the US headquarters are in New Jersey. A 2005 bio from Tyco’s site says that Breen lives in New Hope, Pa. It’s not clear from any of the filings how much time Breen spends in New York.

Of course, with New York State and the City getting more aggressive when it comes to collecting taxes on the high-powered executives who live here, there’s sure to be many more similar arrangements going forward. As we footnoted back in August, CBS head Leslie Moonves set up a similar deal when he signed his new contract.

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