Issues for Compensation Committees to Consider When Grappling With Changes to 162(m) and the Death of the Performance-Based Compensation Exemption

As much has been written regarding the repeal of the performance-based exception to the $1 million dollar deduction limitation under Code Section 162(m) under the Tax Cuts and Jobs Act (the Act), we have highlighted certain issues that compensation committees should consider in the post-Act era as they review 2017 bonus payouts and chart a course forward without having the benefit of the performance-based compensation exception. The Act makes the following key changes to 162(m) effective for tax years beginning after December 31, 2017:  READ MORE

Tax-Exempt Organizations Face a New Excise Tax on Compensation Paid to Executives

President Trump signed the Tax Cuts and Jobs Act of 2017 on Dec. 22, 2017. Effective as of Jan. 1, 2018, the Act adds Section 4960 to the Internal Revenue Code (“Code”), which imposes a new 21 percent excise tax on “Compensation” paid by an “Applicable Tax-Exempt Organization” with respect to employment of any Covered Employee. The employer is responsible to pay the excise tax, even if the amount paid is determined to be reasonable under the intermediate sanction rules. For purposes of Section 4960, the following terms are defined:  READ MORE

Immediate Action Required: Reduction in Maximum Tax Withholding on Equity Compensation

The tax bill formerly known as the Tax Cuts and Jobs Act (the Act) reduces tax rates for individuals, lowering the top marginal tax rate from 39.6% to 37%, effective January 1, 2018. Employers should make sure that the tax rates used for federal tax withholding on equity awards are reduced to correspond to the lower rates under the Act, in order to avoid adverse financial accounting consequences. This change may require an adjustment to payroll systems. READ MORE

New Excise Tax on “Excess” Executive Compensation Paid by Tax-Exempt Employers

This is the fifth article in our series covering the various employee benefits-related changes contained in the Tax Cuts and Jobs Act signed by the President on December 22, 2017.

Some of the most fundamental changes under the Act in the employee benefits and executive compensation arena impact executive compensation paid by tax-exempt employers and may result in the imposition of significant new excise taxes on such employers. READ MORE

Time To Revisit Executive Compensation Arrangements In Light Of Recent Tax Reform

The Tax Cuts and Jobs Act of 2017 (the “Act”) signed into law on December 22, 2017, will significantly impact many public company executive compensation plans and arrangements. Companies should take this opportunity to revisit their overall compensation design and consider whether changes are appropriate to enhance flexibility and/or better align compensation design with the company’s business objectives. This alert highlights changes in the law affecting public company executive compensation arrangements and key considerations in revising compensation plans and arrangements and overall compensation program design.  READ MORE

Regents consider presidential compensation this week

Days before her first performance evaluation, Wendy Wintersteen last week signed a formal five-year contract to serve as president of Iowa State University.

The document outlining her base compensation of $525,000 in the first year, increasing to $550,000 in the second year and to $590,000 in the third year does not include details of the $475,000 deferred compensation package outlined in her offer letter. READ MORE

The tortured truth behind Wells Fargo's 'Trump tax cut' minimum wage raise

Let's make one thing clear: It's hard to beat "Show me the money."

More money going to American workers in the form of bonuses and higher wages for the lowest-paid on the labor ladder are good things — minimum wage increases, in particular. Unlike the individual tax cuts that are set to expire in less than a decade and one-time bonuses, a wage increase is more money in the worker's pocket that's not going away.  READ MORE

Limitation on Deduction of Executive Compensation in Excess of $1M

The Tax Cuts and Jobs Act, just approved by Congress and headed for President Trump’s signature, substantially modifies the limitation on corporate deductibility of executive compensation under Section 162(m) of the Code. The stricter limitations on executive compensation deductibility are presumably intended as a partial offset to the reduction in the corporate tax rate from 35% to 21%.  READ MORE

Did the Enron Scandal Really Change Executive Compensation?

Following a slew of corporate scandals in the early 2000s—most prominently the one involving energy company Enron—the United States government instituted a number of regulatory changes. The largest was the Sarbanes-Oxley Act of 2002, which expanded mandatory financial disclosures, and increased penalties for chief executive officers and chief financial officers who failed to comply. The hope was that, through the impetus of fines and prison time, chief executive officers would change their behavior.  READ MORE