US Corporate Law News: IRS issues guidance on 'performance-based' exception of Internal Revenue Code Section 162(M)

9 September 2018 | Applicable law: US

On August 21, 2018, the IRS issued Notice 2018-68 to provide guidance on the application of section 162(m) of the Internal Revenue Code. 

Section 162(m) limits the allowable deduction for a taxable year for any "applicable employee remuneration" paid by a publicly held corporation with respect to a covered employee. "Applicable employee remuneration" includes payments on a commission basis or qualified performance-based compensation. Specifically, section 162(m) disallows the deduction for any payment to the extent that it exceeds $1,000,000.

The Notice explains how awards made on or prior to November 2, 2017 can continue to qualify for the "performance-based" exception, by giving guidance on the definition of covered employee and remuneration provided pursuant to a written binding contract.

For more information see here.

This article was written with contributions from Tim Piscatelli.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.


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