Seyfarth Synopsis: On January 16, 2025, the IRS issued proposed regulations under Section 162(m) of the Internal Revenue Code of 1986 (the “Code”), which limit the amount of compensation a publicly held corporation may deduct for wages paid to its “covered employees” to $1 million per year. Section 162(m) has been amended over the years to expand the definition of a “covered employee,” which originally was limited to a corporation’s principal executive officer (“PEO”), principal financial officer (“PFO”), and its next three most highly compensated executive officers. Most recently, in 2021 the American Rescue Plan Act of 2021 (“ARPA”) amended the definition of “covered employee” to include, for tax years beginning after December 31, 2026, the corporation’s five highest compensated employees other than its PEO, its PFO and its next three most highly compensated executive officers. The proposed regulations provide guidance on determining and applying Section 162(m) to these next five most highly compensated employees.Continue Reading How Now, High Five? IRS Issues Proposed Regulations for the Expanded Definition of “Covered Employee” Under Section 162(m) that Applies Beginning in 2027