TAX PROVISION

Miscellaneous Business Provisions

Using Tax Policy to Stimulate the Economy | March 2021

Likely the most notable miscellaneous provision is the expansion of Section 162(m) of the Code that generally denies a corporate tax deduction for compensation in excess of $1 million paid to top executive officers of publicly traded companies, known as covered employees. Current regulations apply the limitation to the CEO, CFO and the three next highest paid employees. Beginning in 2027, the limitation will be expanded to include the next five highest paid employees after the current list, bringing the total to 10 employees.

The ARPA also repealed the worldwide interest expense allocation, which is generally favorable to corporations in the determination of foreign source income for purposes of the foreign tax credit. The repeal is effective for tax years beginning after December 31, 2020.

The limitation on excess business losses for noncorporate taxpayers under Sec. 461(l) was extend for another year to years ending before January 1, 2027. Losses are limited to $250,000 with indexation for inflation.

Finally, the ARPA provided that Economic Injury Disaster Loan grants or restaurant revitalization grants from the Small Business Administration will not be included in gross income of the recipient nor will any deductions be denied for items funded by the grants.