Section 162 M Limitation

Section 162 m imposes a 1 million cap on the deductibility of compensation paid to certain executives covered employees by a publicly held corporation.

Section 162 m limitation. 115 97 significantly expanded the scope and application of the limitation. Prior to passage of the tcja section 162 m included an exclusion from the 1 million cap for commission based and qualified performance based compensation. Section 162 m imit on compensation covered employees under section 162 m as interpreted by irs notice 2007 49 a covered employee is any individual who on the last day of the taxable year is.

Prior to its tcja amendment section 162 m 4 contained an exception to the 1 million limitation for qualified performance based pay. The principal chief executive officer peo ceo or an employee acting in that capacity of the corporation. Before the tcja was enacted in december 2017 the deduction limitation.

The law known as the tax cuts and jobs act tcja p l. Section 162 m of the irs code places a 1 million dollar limit on the amount of deductible compensation that a company can pay to their ceo cfo and other three most highly paid executives. Overview of section 162 m section 162 m which became effective in 1994 provides that a publicly traded corporation may not deduct compensation in excess of 1 million per year paid to any covered employee of the corporation.

Section 162 m compensation deduction limitation section 162 m before the tax cuts and jobs act of 2017. Section 162 m limits the deduction of any publicly held corporation to 1 million with respect to compensation paid to a covered employee subject to certain exceptions.