Treasury Department and IRS Issue Guidance on Code Section 162(m)

The Treasury Department and Internal Revenue Service (IRS) have issued initial guidance under Notice 2018-68 (“Notice”) on the amendments to Internal Revenue Code Section 162(m) made under the Tax Cuts and Jobs Act of 2017 (“TCJA”). The Notice provides guidance on the definition of “covered employee” and the transition rule.

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Section 162(m) Prior to TCJA Prior to its amendment under TCJA, Section 162(m) generally prohibited a public company from taking a deduction for compensation that exceeded $1 million during a taxable year that was paid to a “covered employee”. However,…