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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.  

© 2019 Proskauer Rose LLP.


About this Author

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

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.

Andrea S Rattner, Tax Attorney, Proskauer Law Firm

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 agreements and all other types of executive compensation (including incentive arrangements, SERPs, deferred compensation and "409A" and "162(m)" compliant plans). With respect to these issues, she advises companies, boards of directors, compensation committees and senior executives in numerous industries.

Ali David Fawaz, tax law, New York, Proskauer, employee benefits, executive compensation, tax department

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.


Joshua Miller, Employment Attorney, Proskauer Rose Law FIrm

Joshua Miller is a partner in the Tax Department, resident in the Washington, DC office, whose practice covers both executive compensation as well as employee and equity issues in corporate mergers and acquisitions.