OBBBA Impacts on Executive Compensation: Changes to IRC Sections 162(m) and 4960
Introduction On July 4, 2025, H.R. 1 — the One Big Beautiful Bill Act (the OBBBA) was enacted into law. OBBBA introduces significant amendments to the Internal Revenue Code (IRC), including notable changes to sections 162(m) and 4960. [1] Section 162(m) limits the deductibility of executive compensation for publicly held corporations, and section 4960 imposes excise taxes on excess compensation and excess parachute payments paid by certain tax-exempt organizations . These measures serve to raise tax revenue from executive compensation as a partial offset to tax costs elsewhere in OBBBA. This article summarizes the key statutory changes made to sections 162(m) and 4960 by OBBBA and discusses practical implications for affected organizations. OBBBA Changes to Section 162(m) Pre-OBBBA Law . Section 162(m) limits the federal income tax deduction that a publicly held corporation may claim for compensation paid to any “covered employee” to $1 million per year. C...