The Internal Revenue Service released Revenue Ruling 2008-13 on
Section 162(m) limits the annual tax deduction to $1,000,000 for compensation paid to a public company's chief executive officer and other officers. This limit does not apply to performance-based compensation that qualifies under Section 162(m).
The release confirmed a private letter, which concluded that an arrangement failed to qualify as performance-based compensation under Section 162(m) because it permitted paying awards at target levels in a termination without cause, for good reason, or retirement, even if a termination triggering severance did not occur and the awards were paid upon attaining the performance goals.
Companies might review arrangements intended to qualify as performance-based compensation under Section 162(m) to see if compensation will be paid without regard to whether the performance goal is attained if an individual terminates employment for good reason, is involuntarily terminated, or retires.
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