The IRS issued guidance on Sec. 162(m) of the Internal Revenue Code as amended by Sec. 13601 of the Tax Cuts and Jobs Act (TCJA).
Section 162(m)(1) limits the allowable deduction for a taxable year for remuneration paid by any publicly held corporation with respect to a covered employee.
Guidance on Sec. 13601 of the TCJA made significant amendments to section 162(m) and provided a transition rule, commonly referred to as the grandfather rule, applicable to certain outstanding arrangements.
The definition of a “covered employee” and the operation of the grandfather rule—including how to determine whether a contract is a written binding contract and whether a contract has been materially modified—are included in the IRS guidance.