Code Section 162(m) Limitation Clause Samples
The Code Section 162(m) Limitation clause restricts the amount of compensation a company can deduct for certain executives to comply with Section 162(m) of the Internal Revenue Code. In practice, this clause applies to compensation paid to top executives, such as the CEO and other named officers, and limits the tax deductibility of their annual compensation above a specified threshold, typically $1 million. Its core function is to ensure the company remains compliant with tax laws and avoids penalties by not claiming excessive deductions for executive pay.
Code Section 162(m) Limitation. Notwithstanding anything in this Agreement to the contrary, to the extent that Code Section 162(m) would operate to limit the Company’s federal income tax deduction for remuneration with respect to a Participant, resulting in federal income tax liability to the Company, the Participant’s receipt of Shares shall be deferred until Section 162(m) no longer operates to result in such federal income tax liability to the Company. The determination of whether Code Section 162(m) operates to limit the Company’s deduction in a manner resulting in federal income tax liability to the Company will be determined by the Committee. Payment of the Shares shall occur in the following calendar year (or, if necessary, each subsequent calendar year) to the extent such payment, when added to other remuneration subject to the Section 162(m) limit for such year, does not result in federal income tax liability to the Company. Shares deferred hereunder shall be fully vested and shall not be forfeited for any reason, including, without limitation, termination of employment.
Code Section 162(m) Limitation. Notwithstanding the previous provisions of this Section, during any calendar year with respect to which the Grantee is a Covered Officer (for purposes of Internal Revenue Code (“Code”) Section 162 (m)), if the Grantee otherwise would vest in a number of Performance Shares under this Section, the Grantee instead may vest only with respect to a sufficient number of Performance Shares whose aggregate Fair Market Value on the date such restrictions would, when added to the Grantee’s “applicable employee remuneration” (as defined in Code Section 162(m)) for the applicable calendar year that does not constitute “qualified performance-based compensation” (as defined in Code Section 162(m)), not exceed the aggregate amount of $999,999.00 for the applicable calendar year (the “Limitation”). To the extent the restrictions on any Performance Shares do not lapse due to the application of this Section, the restrictions on such Performance Shares shall lapse on the first to occur of:
(i) the last business day of any subsequent calendar year or years to the extent that the Limitation is not exceeded for such year or years;
(ii) the date next following the Grantee’s termination of Service for any reason other than for Cause, or
(iii) the first business day of the year next following the year with respect to which the Grantee ceases to be a Covered Officer. The Company will make all determinations as to whether the lapse of restrictions on any Performance Shares is delayed in accordance with this Section. Such determinations will be made on a uniform and non-discriminatory basis consistent with the requirements under Code Section 409A.
Code Section 162(m) Limitation. The preceding Sections of this Article notwithstanding, no Retirement Benefit shall be paid to the extent such payment, when added to all other remuneration provided to Executive by the Company or any affiliate, would result in any such amount being nondeductible under section 162(m) of the Code, and the payment of any such Retirement Benefit shall be deferred to the first subsequent year in which such payment may be both paid and fully deductible by the Company. In the event payment of a Retirement Benefit is deferred pursuant to this Section, such deferral shall not affect the time of payment or amount of any other installment of Executive's Retirement Benefit, unless such other payment is itself deferred pursuant to this Section. Notwithstanding the foregoing, this Section shall not apply to the Non-Grandfathered Benefit unless all scheduled payments to Executive that could be nondeductible under section 162(m) of the Code are also delayed as provided in Treasury regulation section 1.409A-2(b)(7)(i).