Million-dollar compensation packages would get pricier for big corporations under a late insert to keep the $1.9 trillion coronavirus aid package in line with its deficit targets.
A provision that first appeared in the Senate’s version of the huge relief bill last week and then survived the floor amendment “vote-a-rama” would potentially double the number of the highest-paid executives whose compensation can’t be written off by their companies.
Current law bars public companies from deducting from their tax bills the cost of anything more than $1 million a year in compensation that goes to one of five employees – the chief executive officer, the chief financial officer or the three other highest-paid executives at the company.
The Senate-passed bill, expected to clear the House on Wednesday, would add five more highly paid officials to the list. That means the compensation of up to 10 executives at America’s largest companies couldn’t be written off if the provision becomes law as expected.
“It’s really the largest of the large companies that have multiple executives making over $1 million,” said Kelly Haab-Tallitsch, an attorney at SmithAmundsen LLC in St. Charles, Ill., who focuses on executive compensation.
The change doesn’t go into effect until 2027, when its impact would start to be felt, increasing revenue by $7.8 billion over the following five years, according to the Joint Committee on Taxation. Considering corporate income taxes are already projected to bring in $1.9 trillion during that timeframe, according to the Congressional Budget Office, the tighter executive pay deduction was a small price to pay to fit the relief package into the budget resolution’s constraints.Tightened executive pay limits tucked into coronavirus aid bill – Roll Call