# What This Bill Actually Does

Right now, companies can deduct executive bonuses from their taxes as a business expense, which effectively means taxpayers are subsidizing those bonuses through lost tax revenue. This bill closes that loophole by preventing large corporations from writing off massive executive pay packages. Specifically, it stops companies from deducting compensation over $1 million per year for their top executives—a rule that already exists but only applies to a narrow group of people. This bill expands who counts as a "top executive" and makes the rule apply more broadly.

Currently, the deduction limit only covers the CEO and CFO of publicly traded companies. This bill expands it to include the three highest-paid officers at any company that's required to report to the Securities and Exchange Commission (the federal agency that oversees stock markets). It also changes the definition of "publicly held corporation" to catch companies that were required to file reports at any point during the previous three years, not just those currently filing. This means companies can't escape the rule by going private or delisting from stock exchanges. The changes take effect for tax years starting after December 31, 2020.

The practical impact is straightforward: when executives receive bonuses above $1 million, their companies can no longer deduct those payments from their taxable income. This means companies either pay more in taxes or decide to limit executive bonuses. Either way, it reduces the tax advantage corporations currently get from paying massive executive compensation packages. Supporters argue this is fair because it prevents taxpayers from indirectly funding executive bonuses through reduced corporate tax revenue, while critics might worry it could affect executive recruitment or compensation decisions.

Stop Subsidizing Multimillion Dollar Corporate Bonuses Act

Doggett, Lloyd

Stop Subsidizing Multimillion Dollar Corporate Bonuses Act This bill extends the $1 million limit on the deductibility of executive compensation to all employees of publicly traded corporations.