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Comparison of the Executive Compensation Provisions in the Tax Cuts and Jobs Act

On November 20, 2017, the Senate Finance Committee released legislative text of its version of the Tax Cuts and Jobs Act, which contains proposals modifying certain executive compensation provisions of the Internal Revenue Code. The Senate Finance Committee’s release follows similar provisions proposed by the House of Representatives’ version of the Tax Cuts and Jobs Act (known as H.R. 1, released on November 2, 2017 and modified by the House Committee on Ways & Means (the “Ways & Means Committee”)).  Currently, both plans approved by the House and the Senate Finance Committee include proposals to (1) create a new Section 83(i) that will allow the deferral of income from certain qualified equity grants made by private corporations, (2) significantly expand the scope of the $1 million deductibility limitation on executive compensation described in Section 162(m) (including an elimination of the exceptions for performance-based compensation and commissions) and (3) create a new Section 4960 that subjects excess remuneration paid to certain employees of tax-exempt organizations to an additional 20% tax payable by the employer.  The presence of these proposals in both plans makes it more likely that they will appear in a final version of the Tax Cuts and Jobs Act, if approved by Congress.

The chart in the link below provides a comparison of three proposals released: (1) H.R. 1 as introduced by the House on November 2, 2017; (2) H.R. 1 as reported by the Ways & Means Committee on November 10, 2017 and passed by the House on November 16, 2017 and (3) the bill as reported by the Senate Finance Committee on November 20, 2017.

Comparison Chart of the Executive Compensation Provisions in the Tax Cuts and Jobs Act

This summary does not describe all of the proposals in the Tax Cuts and Jobs Act.   As of the date of posting, the passage of the Tax Cuts and Jobs Act is uncertain.  Ultimate enactment will require the passage of identical bills by both the House and Senate, and the signature of the President. Reconciliation of the two bills will require significant negotiation between the two houses. As a result, the precise form that tax reform legislation will take, when ultimately enacted, remains uncertain. Republican leadership has stated that it plans to present legislation for the President’s approval before the end of 2017.  Therefore, taxpayers should consider the effects of the proposals in the bills now.  

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© 2021 Proskauer Rose LLP. National Law Review, Volume VII, Number 327
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About this Author

Katrine Berger, Proskauer Law Firm, Los Angeles, Labor and Employment Tax Attorney
Associate

Katrine Berger is an associate in the Tax Department and a member of the Employee Benefits & Executive Compensation Group. Katrine has extensive experience with executive compensation, equity compensation and tax-qualified plans, as well as compliance with Internal Revenue Code Sections 162(m), 280G and 409A. Before joining Proskauer, she worked in Ernst & Young’s People Advisory Services, Reward group, focusing on executive compensation and global equity matters arising in financial services organizations.

310-284-5697
Andrea S Rattner, Tax Attorney, Proskauer Law Firm
Partner

Andrea S. Rattner is a member of the firm’s Executive Committee and the immediate past Chair of the Tax Department. 

Andrea practices in the field of employee benefits and executive compensation law. She counsels clients with respect to the tax, securities, corporate governance, stock exchange, ERISA and other implications affecting executive compensation arrangements. Andrea regularly provides advice regarding equity arrangements (such as stock options, restricted stock, RSUs and phantom stock), employment agreements, change-in-control...

212-969-3812
Ali David Fawaz, tax law, New York, Proskauer, employee benefits, executive compensation, tax department
Partner

Ali D. Fawaz is a partner in the Tax Department. Ali's practice focuses on executive compensation and employee benefits matters, with a particular focus on the representation of purchasers and target companies in strategic mergers and acquisitions and private equity buyout transactions. He counsels private and public companies on the structure and design of executive and employee incentive and equity compensation arrangements in corporate transactions, and on the negotiation of high-level executive compensation and termination arrangements.

Ali...

212-969-3409
Joshua Miller, Employment Attorney, Proskauer Rose Law FIrm
Partner

Joshua M. Miller advises senior management teams and individual officers in designing, negotiating and implementing executive compensation arrangements.

Whether in the context of a merger or acquisition, an acceptance, transition or termination of employment, or the ordinary course of employee pay matters, Josh provides legal counsel on a broad variety of securities, tax and employment matters critical to both companies and individuals. He focuses on employment and separation agreements, equity and cash incentive programs, and employee benefit matters in corporate transactions. Josh...

202-416-5828
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