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Section 162(m) denies a deduction to a publicly held corporation generally for compensation to a “covered employee” in excess of $1 million for a year.

Certain deferred compensation plans and agreements maintained by publicly held corporations and subject to Section 409A of the Internal Revenue Code may need to be amended before December 31, 2020, to reflect changes in the tax laws effective in 2018 relating to the $1 million deduction limit under Section 162(m) of the Internal Revenue Code. If action is not taken by December 31, 2020, an employer may be precluded from paying amounts under the deferred compensation arrangement without triggering a 409A tax issue.

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