IRS Publishes Proposed Regulations to Expand Denial of Compensation Deduction Under Section 162(m)

On January 21, 2025, Cravath prepared a memo for its clients entitled “IRS Publishes Proposed Regulations to Expand Denial of Compensation Deduction Under Section 162(m).” The memo examines the Internal Revenue Service’s proposed regulations to expand the group of employees covered by Section 162(m), as required by the American Rescue Plan Act of 2021.

Section 162(m) generally prohibits a public company from claiming a tax deduction for any compensation in excess of $1 million paid to any covered employee. The proposed regulations would expand a public company’s covered employees from the CEO, CFO and the three most highly compensated executive officers to include the five highest compensated employees not currently covered by Section 162(m).

Please click here to read the memo.