The Advisors' Blog

Last week, the WSJ reported that members of the House Ways and Means Committee are considering expanding IRC Section 162(m), which most readers of this blog know limits a public company’s deduction of compensation paid to covered employees to $1 million per year. It’s unclear from the article how exactly the budget bill might reflect an expansion of Section 162(m), but it sounds like it might expand the restriction to a broader group.

Remember that the expansion of this group — currently limited to a company’s named executive officers — is already happening. The 2021 American Rescue Plan Act amended the definition of “covered employee” to add a public company’s five highest compensated employees (even if they are not executive officers) for tax years beginning January 1, 2027 and thereafter. In January, the IRS and the Treasury Department issued proposed regulations to implement the change.

– Meredith Ervine