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Final Regulations Issued Under Code Section 162(m)

The IRS recently issued final regulations regarding the deduction limitation for certain employee compensation in excess of $1 million under the Internal Revenue Code. Proposed regulations were issued on June 24, 2011. The final regulations generally adopt the proposed regulations with some modifications. Code Section 162(m) generally imposes a deduction limit of $1 million on compensation paid by a publicly held corporation during any tax year to a “covered employee,” which generally includes the CEO and the three highest paid officers other than the CEO and CFO. However, the deduction limitation does not apply to qualified “performance-based compensation,” including stock options and stock appreciation rights (“SARs“). The final regulations clarify that for stock options and SARs to qualify for the exception, the requirement to specify the per-employee limitation in the plan is satisfied if the plan specifies an aggregate maximum number of shares with respect to which stock options, SARs,… Continue Reading

April 2015
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