IRS amends proposed regulations on executive compensation

Article Abstract:

The IRS has issued amendments to the proposed regulations that limit executive compensation deductions to $1 million for certain officers of publicly held companies unless the compensation is paid through a qualifying performance-based arrangement. The amendments clarify a number of issues and provide planners with additional examples. The amendments also provide transitional rules for compensation programs that do not currently meet the proposed regulations. In particular, the operations of the compensation committee and how compensation may be computed have been clarified.

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IRS issues final s. 162(m) regulations

Article Abstract:

IRS final regulations clarify the proposed regulations under IRC section 162(m) that restrict deduction of compensation in excess of $1 million paid to chief executive officers and the four highest paid executives of publicly traded companies. The regulations identify when the performance-based compensation exception will apply and how to treat corporations that become public during the contract of a highly paid executive. The regulations also note that performance-based awards may use a salary as a base in the formula used in determining compensation.

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The performance-based compensation exception to the new $1 million compensation deduction limit

Article Abstract:

The final IRS regulations under IRC section 162(m) identify how performance pay to top executives at publicly held corporations can be exempted from the disallowance of compensation deductions in excess of $1 million. Many corporations already use pay based on performance, but the regulations will require changes in pay plan procedures. The compensation committee approving the plan must be made up of outside directors and the plan must be submitted for shareholder approval. The regulations also provide transition rules for plans approved before 1994.

Merit pay

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