IRC Code Section 162(m) imposes a $1 million limit on the amount of compensation paid to a covered employee that publicly held corporations can deduct as a business expense. Congress decided in 2017 that it was time to expand the scope of Section 162(m) and to limit the exclusion for performance-based compensation, effective for tax years beginning after December 31, 2017. The Internal Revenue Service’s initial guidance with respect to the amended Section 162(m) was set forth in Notice 2018-68. A year later, proposed regulations have now replaced and expanded upon that initial guidance.
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.
Mr. Schneider is a graduate of Lehigh University, Columbia University School of Law (JD), New York University (LLM in Taxation), and LaSalle University (MBA). Mr. Schneider frequently writes articles and lectures on tax and employee benefits–related topics, and is coeditor of ERISA: A Comprehensive Guide, 4th Edition (Aspen, 2011).
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