# 2025-00728: Certain Employee Remuneration in Excess of $1,000,000 Under Internal Revenue Code Section 162(m)

2025-00728, Certain Employee Remuneration in Excess of $1,000,000 Under Internal Revenue Code Section 162(m), is a Federal Register proposed rule from an unnamed agency published 2025-01-16, effective These regulations generally are proposed to apply to compensation that is otherwise deductible for taxable years beginning after the later of December 31, 2026, or the date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register. The amendment to the conclusion of Example 23 in section 1.162-33(c)(1)(vi)(W)(2) of the current regulations is proposed to apply to taxable years ending on or after January 16, 2025. (as of 2026-06-11).

- Canonical: https://policyrisk.com/federal-register/2025-00728
- As of: 2026-06-11
- Plain-text twin of the page above; the HTML and this file carry the same facts.

## Facts
- Document number: 2025-00728
- Title: Certain Employee Remuneration in Excess of $1,000,000 Under Internal Revenue Code Section 162(m)
- Type: Proposed Rule
- Agencies: unknown
- Citation: unknown
- Published: 2025-01-16
- Effective: These regulations generally are proposed to apply to compensation that is otherwise deductible for taxable years beginning after the later of December 31, 2026, or the date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register. The amendment to the conclusion of Example 23 in section 1.162-33(c)(1)(vi)(W)(2) of the current regulations is proposed to apply to taxable years ending on or after January 16, 2025.
- Comments close: not stated
- Significant: no
- Touches household money: no
- Regulation identifier numbers: none
- Last updated: 2026-06-11

## Summary

The IRS is proposing new rules that limit how much publicly held companies can deduct on their taxes for paying employees over $1 million. These changes come from updates in the American Rescue Plan Act of 2021 and aim to tighten tax breaks for big executive paychecks. Companies and the public can share their thoughts by March 17, 2025, before the rules become final.

## Abstract

This document sets forth proposed regulations under section 162(m) of the Internal Revenue Code, which limits the deduction for certain employee remuneration in excess of $1,000,000 for Federal income tax purposes. These proposed regulations implement the amendments made to section 162(m) by the American Rescue Plan Act of 2021. These proposed regulations would affect publicly held corporations.

## Effects PRIA read

- Limit on Deductions Above $1,000,000: cost, high. Publicly held corporations cannot deduct, for Federal income tax purposes, employee remuneration that exceeds $1,000,000 for a covered employee. This proposed rule implements section 162(m) and applies for taxable years beginning after the later of December 31, 2026, or the date the final regulatio…
- More Employees Become 'Covered' (Top Five): cost, high. The proposed regulations expand the definition of "covered employee" to include any employee who is one of the five highest compensated employees for the taxable year (other than the PEO or PFO). This expansion (section 162(m)(3)(C)) is effective for taxable years beginning after December 31, 2026…
- Affiliates' Pay Aggregated and Prorated: cost, high. For publicly held corporations, compensation paid by members of an affiliated group (including foreign subsidiaries and partnership distributive shares) is aggregated to determine the five highest compensated employees and the section 162(m) $1,000,000 limit. The proposed regulations require aggreg…
- Third-Party Payors and PEOs Count as Compensation: cost, medium. The proposed regulations adopt the section 3401(c) definition of "employee," so an individual who is employed by another person (for example, a third-party payor or a professional employer organization) but performs substantially all services for the publicly held corporation is treated as the corp…
- Controlled Foreign Corporations' Share Counts: cost, medium. The proposed regulations explicitly treat a publicly held corporation's pro rata share of amounts includible from a controlled foreign corporation (under sections such as 951(a)(1) and 951A) as compensation for purposes of section 162(m). This means certain CFC remuneration-related amounts are take…

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## Sources
- [2025-00728 on federalregister.gov](https://www.federalregister.gov/documents/2025/01/16/2025-00728/certain-employee-remuneration-in-excess-of-1000000-under-internal-revenue-code-section-162m)
- [2025-00728 as published (PDF)](https://www.govinfo.gov/content/pkg/FR-2025-01-16/pdf/2025-00728.pdf)

## Related
- [Previous: 2025-00718, North Atlantic Right Whale Vessel Strike Reduction Rule](https://policyrisk.com/federal-register/2025-00718)
- [Next: 2025-00778, Food Labeling: Front-of-Package Nutrition Information](https://policyrisk.com/federal-register/2025-00778)
- [All Federal Register documents](https://policyrisk.com/federal-register)

Source: PRIA, https://policyrisk.com/federal-register/2025-00728 (as of 2026-06-11).