Articles and Speeches
The Odd Couple: Health Care Reform and Executive Compensation: The Dawn of Code Section 162(m)(6)
June 10, 2010
Susan E. Stoffer
Reproduced with permission from Pension & Benefits Daily, June 8, 2010. Copyright 2010 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com
It has been over 15 years since executive pay first took a hit with the genesis of Section 162(m) of the Internal Revenue Code of 1986, as amended (the code). Section 162(m) was enacted as a part of the Omnibus Budget Reconciliation Act of 1993 1 and was the result of a strong political push following the 1992 election season to curb executive pay.
Under Section 162(m), a publicly held corporation (defined as a corporation with a class of common equity securities that is required to be registered under Section 12 of the Securities Exchange Act of 1934) is not permitted to deduct payments for certain employee compensation in excess of $1 million. Originally, “covered employees” affected by this limitation were restricted under Section 162(m) to the chief executive officer of the corporation and the four most highly compensated employees other than the CEO, whose compensation is required to be reported under securities rules, as determined on the last day of the taxable year.
