Public Company Alert: New Tax Law Re-Writes the Rules under Tax Code Section 162(m)
The Tax Cuts and Jobs Act (the “Act”), which has been approved by the Senate and the House of Representatives, includes a provision that eliminates the “performance-based” exception to the $1 million limit on compensation deductions, and makes certain other important related changes. Under current law, compensation deductions for a publicly-traded employer for its top executives (other than the Chief Financial Officer) is limited to $1 million, plus compensation that qualifies as performance-based. Qualified performance-based pay generally includes stock options and stock appreciation rights, and restricted stock, restricted stock units, and cash incentive bonuses conditioned on the satisfaction of pre-established quantitative performance conditions approved in advance.
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