On January 16, the Internal Revenue Service (IRS) published proposed regulations (90 FR 4691) under Section 162(m) of the Internal Revenue Code. Section 162(m) generally limits the deductibility of compensation paid in any tax year to covered employees of a publicly held corporation to $1 million.

The purpose of the proposed regulations is to clarify certain ambiguities created by the Section 162(m) amendments in the American Rescue Plan Act of 2021 (ARPA), which expanded the definition of a “covered employee” for taxable years beginning after December 31, 2026.

Read more about the proposed regulations and our practical takeaways here.