Tuesday, February 20, 2018

Executive Compensation Performance Metrics Will Change Under Tax Reform

On December 22, 2017, President Trump signed the Tax Cuts and Jobs Act into law, introducing the most sweeping changes to the tax code seen in decades. One of the most notable changes is a reduction in the corporate tax rate from 35 percent to 21 percent.
The obvious impact? Going forward, companies generally will pay less tax while making a larger share of profit available to shareholders. Less obvious is how tax reform will immediately affect financial statements. The change in the tax rate has some complicated ramifications on companies with deferred tax assets (DTAs), deferred tax liabilities (DTL), and significant profits outside the U.S. that are subject to repatriation taxes. The tax reform also changes section 162(m) of the tax code, which affects the deductibility of taxes for senior executives.
Here’s what each of these changes means to outstanding annual incentive and long-term incentive awards.

Read more here.

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