Texas Bar Section Wants IRS Rules To Limit Discretion To Cut Pay

Law360, Washington (March 9, 2020, 8:59 PM EDT) -- Internal Revenue Service regulations regarding deductions for performance-based executive pay topping $1 million should limit the ability of compensation committees to reduce those incentives, a State Bar of Texas section official told the IRS at a hearing Monday.

Negative discretion, which allows compensation committees to reduce or eliminate performance-based compensation, has become commonplace and is a useful feature of compensation plan design, the State Bar of Texas' Tax Section said in a February letter on the proposed rules. However, if the proposed regulations aren't revised to mandate a holistic interpretation of all provisions of compensation plans, it could lead to the...

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