Section 162(m): the Bonus Break (May 10)

Mike & Co. —

April showers in May provides an excuse for a tax focus this week.  How many know that the federal tax code had a provision allowing large firms to write off the bulk of their executives’ wages?  Section 162(m) of the Code has a loophole letting “performance-based” compensation to be claimed as business expenses, costing U.S. taxpayers $5 billion per year (per the JCT).

Half the Senate Democratic caucus has now supported a legislative effort to close the “Bonus Break,” which is easier to grasp than the carried interest loophole and twice as expensive.  

More below.  More on carried interest tomorrow. 

Best,

Dana

———

Performance Incentive or Tax Dodge?

Large companies able to take advantage of Section 162(m) and deduct all “performance-based” compensation packages from a business’ tax liability as a business expense.  That same section of the Code limits the tax deductions for regular salaries to $1 million, but only for the CEO and the next four highest paid officers.  These are the “covered” employees comprising the beneficiaries of the loophole.

Instead of putting an end to galloping CEO salaries, as it was intended to do, Section 162(m) set a floor for executive compensation at $1 million annually, plus any and all bonuses, stock options, or other “performance based” payments a CEO could desire.  While 162(m) does contain four statutory requirements for compensation to qualify as performance based, Congress has already declared that any stock option given to a CEO must be performance based per se.

The massive increase in executive pay seen in the past two decades is probably not a coincidence.   Between 1978 and 2013 CEO compensation has increased by 937 percent; in 1995 the CEO-to-worker compensation ratio was 122.6-to-1 (up from 30-to-1 in 1978) and by 2013 was 296-to-1.

The Current Criteria

A performance-based compensation package needs to meet four criteria to qualify for 162(m) treatment:

•   Performance Goals:  the compensation must be contingent on meeting one of more “pre-established” and quantifiable performance goals

•   Compensation Committee:  the goals must be set by the corporation’s compensation committee

•   Shareholder approval:  shareholders must hold a separate vote to approve the compensation terms, including the applicable goals and the total maximum amount payable to a covered employee, before the compensation package is paid

•   Committee Certification:  before any payment, the compensation committee must certify, in writing, that the performance goals were met

In theory, these requirements set out a minimum level of due diligence for companies to follow when assigning CEOs a performance-based compensation package, but in practice little of it matters.  Since stock options are considered performance-based per se, the simplest solution is to make a sizable amount of any executive’s performance-based pay based on that form — a loophole built into a loophole.

Ending the Corporate Bonus Break

The break had faced criticism from both sides of the aisle.  Sens. Reed and Blumenthal introduced the Stop Subsidizing Multimillion Dollar Corporate Bonuses Act in 2013.  Rep. Lloyd Doggett introduced the companion House bill the next year.  These bills would have recovered the full $50 billion which is lost over 10 years to the loophole.  Former GOP Ways and Means chairman Dave Camp targeted the break in his 2014 tax reform proposal, indicating Section 162(m)’s legislative vulnerability.

The loophole has long been a point of contention in government.  In 2007 the SEC announced it would issue a rule concerning executive pay disclosure, pay if an attempt to shame companies into lowering pay packages. Some expected a democratic surge after Bush left office to take care of the matter once and for all, but 162(m) has survived, due to defense by beneficiary firms.

Criticisms Fall Flat

Lobbyists for these firms have long said that the government has no right to dictate how much firms pay their executives. This argument is not a serious one.  The proposals to deal with the performance-based pay loophole don’t limit firms’ ability to pay CEOs, or any other covered executives.

Will the best executives have less incentive to work if companies lower their pay in the face of higher taxes?   This relies on the (idle) speculation that companies will punish executives for the closing of the bonus loophole.

Chances in Congress Today

Not high.  But the proposal scores many pinball points, hitting on several of the most resonant issues in the political campaign — big corporations (sounds kinda like Wall Street) profiting off a special bonus break for rewarding their top bosses…. Voters oppose this section of the Code by nearly 2 to 1 (63-34) when asked about it.  Corporations should be free to pay their CEOs whatever they choose but asking taxpayers to subsidize those salaries is a non-starter in 2016.  It may be history by next year.

379 thoughts on “Section 162(m): the Bonus Break (May 10)”

  1. I enjoy you because of all your efforts on this site. Ellie enjoys doing internet research and it’s easy to see why. All of us hear all concerning the compelling means you deliver good information by means of the blog and as well cause contribution from other people about this concept plus my daughter is actually being taught a lot. Enjoy the remaining portion of the new year. You’re the one carrying out a glorious job.

  2. I happen to be writing to make you understand what a terrific experience our princess undergone visiting yuor web blog. She picked up such a lot of things, with the inclusion of what it is like to possess an incredible teaching style to make the others without hassle thoroughly grasp specified tricky topics. You undoubtedly surpassed visitors’ expected results. Thanks for showing those valuable, trustworthy, revealing not to mention unique tips on your topic to Sandra.

  3. Thanks for the tips on credit repair on all of this blog. What I would advice people is to give up the mentality that they can buy now and pay later. As a society we tend to do this for many things. This includes vacations, furniture, and items we want. However, you need to separate your wants from all the needs. While you are working to improve your credit score you have to make some sacrifices. For example you can shop online to save money or you can go to second hand stores instead of expensive department stores for clothing.

  4. Türk takipçi ve güvenilir takipçi satın alarak takipçinizi yükseltebilirsiniz. Sizde sosyal medya uygulamalarında daha fazla beğeni, takipçi ve izlenme için takipçi satın alabilirsiniz. Hadi gelin ve instagram takipçi satın alarak takipçi yükseltin.

  5. Good day! I could have sworn I’ve been to this blog before but after reading through some
    of the post I realized it’s new to me. Anyhow, I’m definitely glad I found it and I’ll be
    book-marking and checking back frequently!

  6. Hey there! I know this is kind of off topic but I was wondering which
    blog platform are you using for this site?
    I’m getting sick and tired of WordPress because I’ve had problems with hackers and I’m looking at options for another platform.
    I would be great if you could point me in the direction of
    a good platform.

  7. İnstagram takipçi satın al sitesi sizlerle! İnstagram takipçi sayısını yükseltmek isteyen kullanıcılar için en güvenilir instagram takipçi satın al sitesi hizmet vermektedir. İnstagram profiline akış olmasını istiyorsan eğer yapman gereken tek şey instagram takipçi satın al paketlerini incelemektir. En ucuz instagram takipçi satın al paketlerini al ve hesabını fenomen hale getir.

  8. hi!,I really like your writing so a lot! proportion we keep up a correspondence extra approximately
    your post on AOL? I require a specialist on this area to
    resolve my problem. May be that’s you! Having a look ahead to
    see you.

  9. Sosyal medya uygulamalarının en popüler uygulaması tiktok için hemen takipçi satın al. Tiktok ucuz takipçi satın almak için websitemizi ziyaret et ve hemen en ucuz takipçi satın al.

  10. Tiktok takipçi satın alarak takipçi sayınızı arttırmak sandığınızdan çok daha kolay. Websitemizi ziyaret edin ve takipçi satın almak için paketinizi seçin. Ödeme yöntemlerinden dilediğinizi seçerek, güvenilir tiktok takipçi satın alın. Hadi sende gel ve takipçi satın alarak, takipçi sayını arttır.

  11. Türk takipçi ve güvenilir takipçi satın alarak takipçinizi yükseltebilirsiniz. Sizde sosyal medya uygulamalarında daha fazla beğeni, takipçi ve izlenme için takipçi satın alabilirsiniz. Hadi gelin ve tiktok takipçi satın alarak takipçi yükseltin.

  12. Tiktok’da yükselişin kolay yolu takipçi satın almak. Sizde hesabınızı daha hızlı bir şekilde yükseltmek için tiktok takipçi satın alabilirsiniz. Websitemizi ziyaret ederek, bizimle daima iletişime geçebilir ve tiktok takipçi satın alma işleminizde yardım alabilirsiniz.

  13. Tiktok takipçi satın alarak takipçi sayınızı arttırmak sandığınızdan çok daha kolay. Websitemizi ziyaret edin ve takipçi satın almak için paketinizi seçin. Ödeme yöntemlerinden dilediğinizi seçerek, güvenilir tiktok takipçi satın alın. Hadi sende gel ve takipçi satın alarak, takipçi sayını arttır.

  14. Hey there! I just wanted to ask if you ever have any problems with hackers?
    My last blog (wordpress) was hacked and I ended up losing a few months of hard
    work due to no back up. Do you have any methods to protect against hackers?
    0mniartist asmr

  15. It’s nearly impossible to find well-informed people
    on this topic, however, you sound like you know what you’re talking about!
    Thanks asmr 0mniartist

  16. Today, while I was at work, my cousin stole my iphone and tested to see if it can survive
    a 40 foot drop, just so she can be a youtube sensation. My iPad is now destroyed and she
    has 83 views. I know this is totally off topic but
    I had to share it with someone!

  17. I don’t know if it’s just me or if perhaps everybody else experiencing problems with your blog.
    It looks like some of the written text within your posts are running off the screen. Can someone else please
    comment and let me know if this is happening to them as
    well? This might be a issue with my internet browser because I’ve had this happen before.
    Appreciate it

  18. Hi there! I simply want to offer you a huge thumbs up for the excellent info you have right here on this post.
    I will be coming back to your blog for more soon.

  19. Great beat ! I would like to apprentice even as you amend your web site, how could i subscribe
    for a blog web site? The account helped me a acceptable deal.
    I were a little bit familiar of this your broadcast
    provided vibrant clear concept

  20. Thanks for your marvelous posting! I genuinely enjoyed reading it, you could
    be a great author.I will be sure to bookmark your blog
    and definitely will come back in the future. I want to encourage yourself to
    continue your great work, have a nice afternoon!

  21. Have you ever thought about adding a little bit
    more than just your articles? I mean, what you say is important
    and all. Nevertheless just imagine if you added some great graphics or videos to give your posts more, “pop”!
    Your content is excellent but with pics and videos,
    this website could undeniably be one of
    the best in its field. Fantastic blog!

  22. I’m not sure why but this web site is loading very slow for me.

    Is anyone else having this problem or is it a issue on my end?
    I’ll check back later on and see if the problem
    still exists.

  23. Hi just wanted to give you a brief heads up and let you know a few of the pictures
    aren’t loading correctly. I’m not sure why but I think its a linking issue.

    I’ve tried it in two different internet browsers and both show the same outcome.

  24. I do not even know how I stopped up here, however
    I assumed this post was once great. I don’t recognise who you might be but definitely you’re
    going to a well-known blogger if you are not already.

    Cheers!

  25. Tiktok geçmişi silinmiyor sorunu ile karşı karşıya kalan bireler, bu durumun sebebini merak etmektedir. Bu sorunun meydana gelmesi, pek çok farklı faktörde bağlı olarak gelişebilmektedir. . Aşağıdaki listeyi kontrol ederek Tiktok geçmiş silme sorununa neden olabilen durumlar ve çözümleri hakkında bilgi alabilirsiniz.

  26. Hi there it’s me, I am also visiting this website on a regular basis, this web site is actually
    nice and the users are actually sharing good thoughts.

  27. Youtube Abone satın al

    Youtube abone satın alarak youtuber olmanızın zamanı geldimi?
    tam yerinde olduğunuzu lütfen unutmayınız.
    Sitemiz den vereceğiniz tüm youtube aboneleri gerçek kişilerdir.
    Seçenekler aşşağıdaki gibi paketler oluşturarak sizlere sunmuş bulunmaktayız.
    Youtube aboneler genelde hızlı başlar fakat bazen dünya geneli yoğunluk nedeni ile bu süreç 0 – 12 saat kadar sürebilir bizi tercih ettiğiniz için şimdiden teşekkür ederiz.

    Türkiyenin Lider sosyal medya hizmetleri sağlayıcısı Takip2018

    Uygun fiyat seçeneklerimizden hemen faydalanın
    http://bit.ly/youtubeabonesatınal

  28. İnstagram takipçi satın al bu kadar kolay olmamıştı. En kolay ve en hızlı instagram takipçi satın al paketleri ile sende buluş. İnstagram takipçi satın alma paketlerini hemen kullan ve hesabını yükselt! İnstagram takipçi satın al için en güvenilir site için linke tıklayınız. İnstagram takipçi satın alma ucuz bir şekilde gerçekleşir ve sizi popüler hale getirir.

  29. scoliosis
    Hi! I know this is kinda off topic nevertheless I’d figured I’d ask.

    Would you be interested in trading links or maybe guest writing a
    blog article or vice-versa? My blog goes over a lot of
    the same subjects as yours and I think we could greatly benefit from
    each other. If you might be interested feel free to shoot me an email.
    I look forward to hearing from you! Terrific blog by the way!
    scoliosis

  30. Hc pigment Control Leke Kremi

    HC Pigment-Control’ün cilt lekelerine karşı hızlı ve güçlü etkisi, Kuzey Kanada Bozkırları’na özgü bir tarla bitkisi olan Rumeks’ten (Tyrostat™), tabiatın yeniden canlandırma mucizesi olan Yeniden Diriliş Bitkisi’ne kadar birçok
    doğal ve saf aktif bileşene dayalıdır. Tüm bu aktif bileşenlerin, lekeler ve cilt yaşlanması üzerindeki etkileri in-vivo testler ve klinik laboratuvar çalışmalarıyla kanıtlanmıştır.
    Tüm cilt tiplerinde, leke problemlerini giderme ve önlemede, cilt tonu eşitsizliğinde, cilt aydınlatmasında, nem ihtiyacı
    olan ciltlerde güvenle kullanılabilir.

    Leke krEMi için hemen sitemizi ziyaret et

  31. Tiktok takipçi satın alma konusunda türkiye’nin lider sosyal medya ajansını denediniz mi? Sizde tiktok takipçi satın al hizmetini ucuz bir şekilde kullanmak için hemen takipçi satın alabilirsiniz. Türk, gerçek, aktif, güvenilir ve en ucuz tiktok takipçi satın alma hizmeti ile yükselişe geç. Tiktok takipçi satın al ve takipçini rakiplerine oranla arttır.

  32. scoliosis
    Great website you have here but I was curious if you knew of any community forums that cover the same topics talked about here?
    I’d really like to be a part of group where I can get feedback from other experienced individuals that share the
    same interest. If you have any suggestions, please let me know.
    Thanks a lot! scoliosis

  33. dating sites
    Woah! I’m really loving the template/theme of this site.
    It’s simple, yet effective. A lot of times it’s challenging to get that
    “perfect balance” between superb usability
    and appearance. I must say that you’ve done a great job
    with this. Additionally, the blog loads super quick for me on Internet explorer.

    Outstanding Blog! free dating sites https://785days.tumblr.com/

  34. dating sites
    You really make it appear so easy with your presentation however I find this matter to be actually something which I feel I would never understand.

    It sort of feels too complicated and very wide for me.
    I’m having a look ahead to your next post, I will try to get the hang of
    it! dating sites

  35. Please let me know if you’re looking for a writer for your blog.

    You have some really good articles and I feel I would be a good asset.
    If you ever want to take some of the load off, I’d really like to write some
    material for your blog in exchange for a link back to mine.

    Please send me an email if interested. Cheers!

  36. I’m not that much of a internet reader to be honest but your sites really nice, keep it
    up! I’ll go ahead and bookmark your site to come back
    in the future. All the best

  37. Have you ever considered creating an e-book or guest authoring on other
    blogs? I have a blog based on the same topics you discuss and would love to have you share some
    stories/information. I know my readers would appreciate your work.
    If you are even remotely interested, feel free to shoot me an e-mail.

  38. Hey! I know this is somewhat off topic but I was wondering if you
    knew where I could find a captcha plugin for my comment form?
    I’m using the same blog platform as yours and I’m having
    trouble finding one? Thanks a lot!

  39. İnstagram takipçi satın alma sitesi ile takipçi arttırmak artık çok kolay! İnstagram takipçi satın al paketlerimiz ile takipçi sayınızı güvenle yükseltebilirsiniz. Güvenilir ve ucuz instagram takipçi satın al hizmetimiz ile tanışmak için sitemizi ziyaret edin. İnstagram takipçi satın al hizmetimizi denemek için güvenilir instagram takipçi satın alma sitemizi inceleyin. En güvenilir instagram takipçi satın alma paketleri sadece sitemizde.

  40. Thanks for some other wonderful article. Where else may just anyone get that type of info in such an ideal method of writing?
    I’ve a presentation subsequent week, and I’m on the look for such
    info.

  41. Magnificent web site. Lots of helpful information here. I’m sending
    it to several pals ans additionally sharing in delicious.
    And obviously, thank you in your effort!

  42. İnstagram takipçi satın al hizmeti ile takipçi sayını arttırmaya başla! Türkiye’nin en güvenilir instagram takipçi satın alma sitesi ile takipçi sayınızı arttırmak çok kolay. Güvenilir ve ucuz instagram takipçi satın alma paketleri sunan sitemiz ile güvenilir bir şekilde hesabını yükselişe geçir! İnstagram güvenilir takipçi satın almak için sitemizi ziyaret edin.

  43. Tiktok organik takipçi satın al hizmetimiz ile hesabını yükselişe geçirmeye hazır ol! Güvenilir, ucuz ve organik tiktok takipçi satın al hizmeti sunan sitemiz ile kaliteli takipçi satın alma paketlerinin tadını çıkar. Tiktok takipçi satın al hizmetimizi kullanmaya başlamak için 4 yıldır hizmet verdiğimiz tiktok takipçi satın alma sitemizi ziyaret edebilirsiniz.

  44. Tiktok’da takipçi satın almak bu kadar kolay olmamıştı. En kolay ve en hızlı tiktok takipçi satın al paketleri ile sende buluş. Tiktok takipçi satın alma paketlerini hemen kullan ve hesabını yükselt! Tiktok takipçi satın al için en güvenilir site için linke tıklayınız. Tiktok takipçi satın alma ucuz bir şekilde gerçekleşir ve sizi popüler hale getirir.

  45. Güvenilir instagram Takipçi satın alma sitesi ile takipçi kazanmaya başla! 4 yıldır güvenilir ve kesintisiz İnstagram takipçi satın alma hizmeti sunan sitemiz ile sen de takipçi sayını arttırmaya başla. Ucuz ve aktif instagram takipçi satın al servisi sunan sitemiz ile profiline organik takipçi gönder. İnstagram takipçi satın al hizmetimiz ile hesabını geliştirmek için instagram takipçi satın alma sitemizi incele.

  46. instagram takipçi satın almak artık çok basit! Kolay instagram takipçi satın almak isteyenlere özel sitemiz sizlerle. İnstagram takipçi satın almak için güvenilir ödeme yöntemi ve 7/24 canlı destek ile güvenilir takipçi satın alın. Paketlerimiz ucuz instagram takipçi satın al paketlerinden oluşmaktadır. İnstagram takipçi satın alın ve hesap profilinizin kitlesini arttırın.

  47. Hello there! Would you mind if I share your blog with my twitter group?
    There’s a lot of people that I think would really appreciate your content.
    Please let me know. Thanks

  48. Can I simply say what a relief to find somebody that really understands what they
    are talking about on the internet. You actually understand how to bring a
    problem to light and make it important. A lot more people
    must look at this and understand this side of your story.
    I was surprised you’re not more popular because you surely have the gift.

Leave a Comment

Your email address will not be published. Required fields are marked *