Stop Subsidizing Corporate Bonuses

Summary#

This bill changes the Internal Revenue Code (section 162(m)) to expand when corporations cannot deduct large payments to people who provide services. It replaces several uses of the word "employee" with "individual," broadening who is covered. It updates the definition of "publicly held corporation" to include entities that had to file certain SEC reports during the prior three tax years. The bill also gives the Treasury Secretary authority to write rules on reporting and to stop companies from avoiding the rule by paying through pass-through or other entities. The changes apply to taxable years beginning after December 31, 2024.

What it means for you#

• For companies: Some payments to people who perform services may no longer be deductible for federal income tax purposes. The rule applies to a wider group of people than before, not just certain officers called "employees."
• For individuals who receive large pay: More types of pay could be affected because the law now covers "individuals" who perform services (directly or indirectly) and includes certain officers reported in prior years.
• For tax administration: The Treasury Secretary can issue rules about reporting and preventing avoidance, including payments made through pass-through entities.

Expenses#

No publicly available information.

Proponents' View#

Proponents say the bill expands the existing denial of deductions for excessive remuneration so that corporations do not get tax deductions for multimillion-dollar bonuses or similar large payments. The bill’s text also seeks to prevent companies from avoiding the rule by using pass-throughs or other entities.

Opponents' View#

No publicly available information.