IRS Changes Position on Performance-Based Compensation for Public Companies


The Internal Revenue Service (IRS) has taken a new position under Section 162(m) of the Internal Revenue Code as it relates to the deductibility by a public company of “qualified performance-based compensation” paid to its highly compensated employees.

Section 162(m) of the Internal Revenue Code limits a public company’s ability to deduct compensation to the company’s Chief Executive Officer and its other four highest-compensated employees. That limit is $1 million for each such employee per year. A public company can deduct in excess of that $1 million amount if it pays the compensation to such employee in the form of “qualified performance-based compensation,” as defined under rules set forth in Section 162(m).

This new position by the IRS changes its historical position regarding one of those rules.

LOADING PDF: If there are any problems, click here to download the file.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Barnes & Thornburg LLP | Attorney Advertising

Written by:


Barnes & Thornburg LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.