On Tuesday, the IRS issued widely-anticipated guidance regarding
certain amendments that were made by the Tax Cuts and Jobs Act to
Section 162(m) of the Internal Revenue Code. 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 amendments to 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 date.
