Section 162(m) of the Internal Revenue Code limits the deductibility of compensation paid by public companies to certain of their executives in any year to $1 million. The 2017 Tax Cuts and Job Act amended Section 162(m) to expand the number of executives at a public company whose compensation may be non-deductible by reason of its provisions, including as a result of mergers, acquisitions and other corporate transactions. This alert memorandum discusses the potential impact of the Internal Revenue Service’s recently proposed Section 162(m) regulations in the transactional context, which, if the proposed regulations are adopted as proposed, could be financially significant to some acquisitions, as well as acquisitive public companies.

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