Just Treatment for CFOs Following the 162(m) Suggested Guidelines

Previously, I talked about the latest Proposed Regulations put in place by IRS and the Treasury Dept. on the alterations to Code Section 162(m) put in place by the 2017’s Tax Cuts and Jobs Act. This is chief progress for executive compensation experts, however, I ceased blogging as we approached the Holiday Season. Now that the vacations are over, I will start by directing my attention to a single feature of the suggested regulations at a time.

Today I will talk about the exclusion of a particular sum given to the CFO in the transition regulations of Section 162(m). It is noted that, under the suggested regulations, CFOs are the most expected class of present executives to hold grandfathering protection for sums paid pursuant to a binding agreement set in place since the 2nd of November 2017.

You may remember that the sums paid pursuant to a binding agreement set in place since the 2nd of November 2017, may be excluded from the $1 million discount limit of 162(m) under particular circumstances. For instance, specific incentive rewards made prior to the 2nd of November 2017, which fell on the performance-based compensation checklist of pre-TCJA endowment of 162(m). these included stock options, etc.

Even more constructive, are the grandfathering regulations for CFOs. Before the 2nd of November 2017, the firm’s CFO failed to be covered under 162(m). It was hence not applicable when referring to the deductibility restraint of $1 million. Consequently, even if the sum isn’t performance-based, paid compensation to the CFO pursuant to a grandfathered employment contract could be excluded.

On the 2nd of October 2017, Corporation implemented a 3-year employment contract with its CFO for a yearly salary of $2,000,000 starting from the 1st of January 2018. According to the contract, there are automatic extensions following the 3-year term for an added 1-year period, unless the contract is terminated by the Corporation.