On January 17, the Senate Finance Committee approved legislation that would limit nonqualified deferred compensation for executives. Specifically, the legislation would amend the Internal Revenue Code to:

  • limit the annual accrual of nonqualified deferred compensation to the lesser of $1 million and the executive's average annual compensation over the previous five years. Exceeding the cap would trigger ordinary income tax plus a 20% additional tax; and

http://www.house.gov/jct/x-5-07.pdf

  • Amend Section 162(m), which provides that compensation in excess of $1 million paid by a publicly-held corporation to the corporation’s “covered employees” (its chief executive officer and four other most highly compensated employees) generally is not deductible, to treat any former executives who were “covered employees” for any preceding taxable year beginning after December 31, 2006 as continuing to be covered by the deduction limits of Section 162(m)

http://www.house.gov/jct/x-5-07.pdf