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ARTICLE · 16 DECEMBER 2009

Action Required For 2010 162(M) Performance Pay

Fenwick
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Section 162(m) of the Internal Revenue Code (the "Code") denies a tax deduction to a public company if compensation paid to certain individuals (known as "covered employees") exceeds one million dollars for the taxable year.

United StatesEmployment and HR
Scott Spector
Scott Spector
Gerald Audant
Gerald Audant
Nicholas Frey
Nicholas Frey
John Ludlum
John Ludlum
Blake Martell
Blake Martell
Liza Morgan
Liza Morgan
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Background

Section 162(m) of the Internal Revenue Code (the "Code") denies a tax deduction to a public company if compensation paid to certain individuals (known as "covered employees") exceeds one million dollars for the taxable year. However, compensation that is "performance-based" within the meaning of Code Section 162(m) is deductable by the public company for tax purposes. A "covered employee" is defined as a public company's Chief Executive Officer and its three other most highly compensated officers (excluding the CFO) whose compensation is required by the SEC to be disclosed for a given year.

New Ruling

On February 21, 2008 the IRS released Revenue Ruling 2008- 13 (discussed previously in our earlier alert at http://www.fenwick.com/docstore/Publications/Corporate/Execu_ Comp_02-22-08.pdf. Revenue Ruling 2008-13 ruled that compensation paid by a public company that is intended to constitute "performance-based" compensation (such as a covered

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