August 1, 2019
162(m) Is Gone, But What About Similar State Laws?
– Liz Dunshee
Yes, way back in 2017 the Tax Act eliminated Internal Revenue Code Section 162(m) – the “qualified performance-based compensation” exception for deductible compensation – but not only are companies still wading through the fall-out and disclosure implications, there are also state tax laws that were modeled on the old tax provision that still exist. So, as this FW Cook blog points out, there was potentially a state income tax benefit to continuing to comply with Section 162(m)’s parameters. Now, though, there’s one less state where that’s possible – because California has conformed its tax code to the Section 162(m) changes under the tax act. Here’s an excerpt from the blog:
To the extent a company paying California taxes had been complying with the design and administrative rules of old Section 162(m) in order to reduce California taxes, it should reassess the company’s executive compensation program in light of the new law, including reviewing in-process performance-based awards to determine whether these arrangements qualify for the new grandfathering exception. It may also be possible for such a company to simplify compensation arrangements going forward, to the extent there were mechanics in place primarily intended to satisfy the requirements for performance-based compensation (for example, an umbrella goal under an annual cash incentive plan).
We’ll be discussing Section 162(m) deductibility – and whether there’s really any “grandfathering” – at our our popular conferences – “Proxy Disclosure Conference” & “16th Annual Executive Compensation Conference” – to be held September 16-17th in New Orleans and via Live Nationwide Video Webcast. Here are all the agendas – nearly 20 panels over two days. It’s only six weeks away – and our reduced rate expires at the end of tomorrow, Friday, August 2nd – so register today!