House Tax Bill Proposes Dramatic Changes to Long-Standing Treatment of Executive Compensation Arrangements

On November 2, the Committee on Ways and Means released the proposed Republican tax reform bill which would make substantial changes to individual and corporate tax provisions. It also includes several changes to two well-known executive compensation rules governing performance-based deductions for named executive officers (NEOs) under Section 162(m) and the ability to defer taxation of income under Section 409A. While we don’t normally blog about proposed legislation, the following two provisions included in the Republican proposal would have a material impact on executive compensation. 

While this bill includes momentous change to the status quo, it is still just a bill and we have seen plenty proposed during the current administration that have gained no traction. The provisions above face a long list of obstacles before any are even close to becoming a law so we would not recommend making any sudden changes in anticipation of change. We will keep you posted with updates to follow.