The U.S. Treasury Department and IRS yesterday afternoon (December 16, 2019) released for publication in the Federal Register proposed regulations (REG-122180-18) that reflect changes made to section 162(m) from the 2017 tax law (Pub. L. No. 115-97, the law that is often referred to as the “Tax Cuts and Jobs Act” (TCJA)).
Section 162(m) generally disallows a deduction for compensation paid in any tax year to a covered employee of a publicly held corporation that exceeds $1 million.
The proposed regulations confirm the interpretations from Notice 2018-68 and update the definitions of covered employee, publicly held corporation, and applicable employee compensation as well as provide a significant number of useful examples applying the guidance. Read the proposed regulations [PDF 434 KB] (36 pages as published in the Federal Register)
The following report provides initial impressions about these proposed regulations.
Example: Public company uses a calendar year for fiscal year SEC reporting, but uses a tax year of July 1, 2019, through June 30, 2020. The three highest compensated executive officers are determined under the SEC rules as if the fiscal year ran from July 1, 2019, through June 30, 2020.
Example: A corporation permitted recovery of part of a bonus if the employee is convicted of a felony within three years. If the employee is not convicted, the amounts remains grandfathered. If the employee is convicted, the portion subject to recovery is not grandfathered.
For more information, contact a tax professional in the Compensation and Benefits practice of KPMG’s Washington National Tax:
Robert Delgado | +1 858 750 7133 | firstname.lastname@example.org
Terri Stecher | +1 202 533 4830 | email@example.com
Gary Cvach | +1 202 533 3116 | firstname.lastname@example.org
Erinn Madden | +1 202 533 3757 | email@example.com
Carolyn Rhodes | +1 202 533 3530 | firstname.lastname@example.org
Kelli Cacciotti | +1 202 533 3902 | email@example.com
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