March 17, 2020 - Douglas Myser

Executive compensation limits. In drafting these proposed regulations, The Treasury Department and the IRS have considered all comments received on the notice. Commenters noted that the many examples in Notice 2018-68 were helpful in illustrating the guidance in the notice. In light of these comments, the Treasury Department and the IRS have included numerous examples in these proposed regulations to illustrate the proposed rules. Executive compensation limits.

Section 13601 of the Tax Cuts and Jobs Act significantly amended section 162(m). This document adds a section to the Income Tax Regulations to reflect these amendments. The amended IRS section 162(m) applies to taxable years beginning after December 31, 2017, except to the extent the grandfather rules apply. The IRS issued proposed regulations under Section 162(m), which disallows a deduction by any publicly held corporation for employee remuneration paid to any covered employee to the extent that the employee's remuneration for the tax year exceeds $1 million. Section 162 (m) was amended in 2017 by the law known as the Tax Cuts and Jobs Act, P.L. 115-97. The amendments changed the definition of covered employees, broadened which publicly held corporations are subject to the law, and eliminated the exception from the $1 million limit for remuneration payable on a commission basis and qualified performance based compensation. The amendments generally apply to tax years beginning after Dec. 31, 2017, but under a grandfather rule they do not apply to remuneration paid under a written binding contract that was in effect on Nov. 2, 2017, and was not modified in any material respect on or after that date.

In August 2018, the IRS issued Notice 2018-68, which provided guidance on the amended rules for identifying covered employees and on the operation of the grandfather rule, including when a contract will be considered materially modified so that it is no longer grandfathered. The notice also asked for comments on certain issues, which were considered in promulgating the proposed regulations.

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