IRS Issues Guidance on Two of the Changes Made to Section 162(m) by the Tax Cuts and Jobs Act (Journal Article)

The IRS recently issued new guidance to help corporations that are subject to the broader scope of Section 162(m) implement two aspects of that provision. These two aspects relate to the identification of covered employees and the operation of the grandfather rule. In connection with the application of the grandfather rule, the IRS explains what constitutes a grandfathered contract, what is the amount of the grandfathered compensation, what effect the corporation’s retention of negative discretion may have on a contract’s grandfathered status, and what material modifications may negate that grandfathered status.

Author: Paul J. Schneider, JD, LLM, is senior counsel to Paisner~Litvin, LLP, Bala Cynwyd, Pennsylvania, where he has advised clients on taxation and employee benefit matters for more than 30 years. He is a charter fellow of the American College of Employee Benefits Counsel and has served as chairman of the Important Developments Subcommittee of the American Bar Association Tax Section’s Employee Benefits Committee. Mr. Schneider is also a member of the board of editors of the Journal of Taxation.