On Monday, December 16, 2019, the IRS issued proposed regulations under Section
162(m) of the Internal Revenue Code to reflect certain changes that
were made to Section 162(m) by the Tax Cuts and Jobs Act of
2017.
Background
Under Section 162(m), compensation paid to a publicly held
corporation's "covered employees" that exceeds $1
million per year for any covered employee is non-deductible. Among
other changes, the act amended Section 162(m) to expand the scope
of covered employees and eliminate the qualified performance-based
compensation exemption from the $1 million deduction limit.
The amended rules under Section 162(m) apply to taxable years
beginning on or after January 1, 2018. However, the act provides
transition relief under which certain compensation paid pursuant to
a written binding contract in effect on November 2, 2017, will be
grandfathered and not subject to the amended rules, provided that
the contract is not materially modified on or after that
