Executive Compensation Limitations: New IRS Section 162(m) Guidance and Key Planning Tips

On Aug. 21, 2018, the IRS issued Notice 2018-68 providing guidance on the changes made to Section 162(m) under tax reform. Counsel must understand the restrictions on specific executive compensation structures, including the transition rule concerning grandfathered arrangements, compensation paid under written binding and other complex items impacting compensation planning.

Tax reform amended Section 162(m) significantly by removing the performance-based pay exception, broadening the definition of “covered employees,” and providing specific rules applicable to written binding contracts. Other restrictions provided in Notice 2018-68 limit the availability of grandfathering relief for existing arrangements and effect the deduction limitation in certain corporate transactions. Counsel must be knowledgeable of crucial planning issues stemming from amended Section 162(m) and IRS Notice 2018-68 and acquire planning techniques to avoid unattended pitfalls in structuring compensation arrangements.

Listen as our panel discusses the critical challenges of Section 162(m), covered employees, grandfathering rules for certain compensation arrangements, new written binding contract rules, and planning methods in structuring compensation packages in light of the new regulations.

1. Provisions of amended Section 162(m) and impact on compensation planning and certain transactions
2. Defining “covered employees” for compensation deduction limitations
3. Grandfathering rule and key considerations
   1. Identifying arrangements subject to the grandfathering rule
   2. Preserving grandfathered status and key considerations
   3. Material modifications to existing arrangements
   4. The written binding contract rule
4. Best practices and planning tips for compensation packages in light of new IRS guidance

The panel will discuss these and other compelling issues:

• The impact of amended Section 162(m) on compensation packages
• Determining “covered employees” and understanding compensation limitations
• Considerations for arrangements subject to grandfathering rule
• Preserving grandfathered status and implications of material modifications to existing arrangements
• Understating the written binding contract rule
• Best practices for counsel in developing compensation structures and planning considerations

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• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience at mid-level within the organization, structuring employee benefit and executive compensation arrangements; supervisory authority over other preparers/accountants. Knowledge and understanding of executive compensation practices and familiarity with structuring performance-based compensation plans.

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