Executive compensation – Watch out for performance pay tax traps

Description

Abstract: At year end, public companies need to evaluate performance-based compensation arrangements with top executives to ensure that these arrangements meet tax deductibility requirements. Otherwise, their tax bills could increase by hundreds of thousands — or even millions — of dollars. This article describes the steps necessary to avoid the $1 million cap normally associated with this deduction. A sidebar states the requirements for stock-based awards to qualify as performance pay.