An Encore 'Performance' from the IRS - Severing Deductions Under Section 162(m)
36 Tax Management Comp. Pl. J. 52 (3/7/08), reprinted in BNA Tax Management Memorandum (9/28/08)
7 Pages Posted: 2 Nov 2016 Last revised: 3 Nov 2016
Date Written: March 7, 2008
The question of whether under Section 162 (m) of the Internal Revenue Code a compensation plan can pay out performance-based compensation in the event of a termination without cause, and still be a valid performance-based plan under Section 162 (m), can be a difficult and nuanced question. Early IRS private rulings indicated "yes" and a later IRS Revenue Ruling says "no". This article explores the evolution of the authority, and sets forth proposed approaches for designing arrangements in light of this issue.
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