House Ways & Means Proposes Accelerating Changes To Section 162(M)

In March 2021, the American Rescue Plan Act of 2021 (ARPA) amended Section 162(m) of the Internal Revenue Code (the "Code") to expand the covered employees subject to its compensation deduction limitation. Pursuant to the amendment, five additional employees will be covered each year, and such employees need not be executive officers of the company. The ARPA amendment indicated it would be effective for tax years beginning after December 31, 2026, giving companies approximately five years to prepare for the change.¹ However, the House Ways & Means Committee's recent proposal would accelerate the effectiveness of the ARPA amendment to tax years beginning after December 31, 2021. If this provision makes it into the final legislation, employers would need to be ready to implement it in just a few months.