January 13, 2020
Authored by: Adam Braun and Jennifer Stokes
Section 162(m) of the Internal Revenue Code disallows a deduction by any publicly held corporation for applicable employee remuneration paid with respect to any covered employee to the extent that remuneration for the taxable year exceeds $1 million. As we’ve previously blogged here, here, and here, the bill popularly referred to as the Tax Cuts and Jobs Act of 2017 significantly amended and expanded the scope of Section 162(m) for taxable years beginning after December 31, 2017, including by eliminating its performance-based compensation exception. Now, Proposed Regulations on the amended Section 162(m) have been released which expand on the entities, individuals and compensation that are now subject to Section 162(m).
This blog highlights some of the common questions that the Proposed Regulations attempt to clarify. The Proposed Regulations supersede (but largely confirm) the guidance in Notice 2018-68 (released in August 2018) and will generally be effective for taxable years beginning after the publication of the final regulations, except with respect to guidance relating to covered employees and grandfathered arrangements, which will be effective as of September 10, 2018.
- What does it mean to be a “publicly held corporation”?
A publicly held corporation includes any corporation whose securities (debt or equity) are required to be registered under Section 12 of the Exchange Act or that is required to file reports under Section 15 of the Exchange Act, in each case, as of the