Key takeaways

• The Internal Revenue Service has adopted final rules amending its regulations under Section 162(m) of the Internal Revenue Code to clarify how certain exemptions from the $1 million deduction limitation for public companies apply to equity-based compensation.
• To be eligible for beneficial tax treatment under post-IPO transition relief, RSUs and performance share units that do not otherwise qualify for the performance-based compensation exemption must be paid, and not merely granted, during the transition period.
• For Options and SARs to qualify for the performance-based compensation exemption, the plan granting such compensation must specify a per-employee maximum number of shares that can potentially be granted during a specified period, either pursuant to stock options and appreciation rights, or all equity-based awards.