Ending Tax Breaks for Multimillion-Dollar Corporate Bonuses
This act aims to limit companies' ability to deduct very high bonuses paid to their top-earning employees from their taxes. In practice, this means companies will no longer be able to reduce their taxes at the expense of multi-million dollar bonuses, which may affect their compensation strategies. These changes apply to tax years beginning after December 31, 2020.
Key points
Companies will no longer be able to deduct bonuses paid to key employees if those bonuses exceed a certain limit.
The definition of "covered individual" has been expanded, meaning more high-ranking individuals will be subject to these limitations.
The changes also apply to companies previously not covered but required to file financial reports.
Tax authorities gain new powers to create regulations preventing circumvention of these rules, for example, by paying compensation through other entities.
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