UPPER SADDLE RIVER, N.J. November 13, 2017
A review of the proposed House Republican Tax Reform Bill (H.R.1) clearly indicates that it doesn’t do any favors for C-Suite executives. For private and publicly-traded companies, it would tax deferred compensation when it vests, or in 2026. In not-for-profits (NFP), which already have vesting requirement, if the deferral was prior to 2018, the deferred account would be taxable in 2026.
Currently, in public companies, IRC §162(m) allows the company an exemption for performance-based compensation. This exemption would be removed and any compensation over $1 million could not be deducted for tax purposes. This would include not only the CEO, but also the CFO and other individuals who became officers after 2016.
Lastly, in the event that an officer of an NFP receives any compensation (and some severance), in excess of $1 million, the NFP would be subject to a 20% excise tax on the amount over $1 million. NFPs currently do not pay any taxes on covered compensation.
About Compensation Resources, Inc. (CRI): CRI provides compensation and human resource consulting services to mid- and small-cap public companies, private, family-owned, and closely-held firms, as well as not-for-profit organizations. CRI specializes in executive compensation, sales compensation, pay-for-performance and incentive compensation, performance management programs, and expert witness services.
Paul R. Dorf, APD
Chairman, Managing Director
Compensation Resources, Inc.
877-934-0505 • Fax: 201-934-0737
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