Tax Law Changes To Executive Compensation

The tax law signed by the President on December 22, 2017 makes a number of changes to the executive compensation rules for public and private companies as well as for non-profit employers. This Advisory briefly summarizes certain of the key changes.

Broad Expansion of Section 162(m) $1 Million Compensation Limitation

• Performance-Based Compensation Exception Repealed. Historically, performance-based compensation, such as stock option income and compensation paid only on the attainment of performance goals, has been excepted from the $1 million deduction limitation. The performance-based compensation exception is repealed by the new law.
• CFOs Again Subject to Section 162(m). The legislation amends Section 162(m) to specifically include a publicly held corporation's principal financial officer as a "covered employee" subject to Section 162(m). This corrects an unintended gap that, since 2007, left CFOs generally not being subject to Section 162(m) (due to changes