ARTICLE
12 September 2018

US Corporate Law News: IRS Issues Guidance On 'Performance-Based' Exception Of Internal Revenue Code Section 162(M)

WL
Withers LLP

Contributor

Trusted advisors to successful people and businesses across the globe with complex legal needs
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.
United States Corporate/Commercial Law

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 https://www.irs.gov/pub/irs-drop/n-18-68.pdf.

This article was written with contributions from Tim Piscatelli.

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