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Proposed Regulations Implementing the Expanded Definition of “Covered Employee” Under Code Section 162(m)

By , and 5 Mins Read

On January 14, 2025, the Internal Revenue Service (“IRS”) published proposed regulations (the “Proposed Regulations”) under Section 162(m) of the Internal Revenue Code (“Code”), which generally limits publicly held companies to a $1 million annual tax deduction for compensation paid to “covered employees” in a taxable year. The Proposed Regulations implement amendments made to Code Section 162(m) by the American Rescue Plan Act of 2021 (the “ARPA”) to expand the definition of “covered employee” to…

Taking Stock of Grandfathered Compensation under Amended Code Section 162(m)

By and 5 Mins Read

Now that we have had a couple of weeks to digest the IRS’s guidance in Notice 2018-68 on the Tax Cuts and Jobs Act’s (TCJA’s) amendments to Code Section 162(m), it’s a good time to take a closer look at the “grandfathering” rule. As a reminder, the TCJA (i) eliminated the “performance-based compensation” exception to Section 162(m)’s $1 million limit on the deductibility of covered employee compensation, (ii) expanded and made permanent the group of…