Section 162(m)(6) of the Code: Limit on Deduction for Compensation Paid by Health Insurers under Health Care Reform | Practical Law

Section 162(m)(6) of the Code: Limit on Deduction for Compensation Paid by Health Insurers under Health Care Reform | Practical Law

The Internal Revenue Service recently released final regulations under Section 162(m)(6) of the Internal Revenue Code (IRC), which became effective on September 23, 2014.

Section 162(m)(6) of the Code: Limit on Deduction for Compensation Paid by Health Insurers under Health Care Reform

by Practical Law Employee Benefits & Executive Compensation
Published on 07 Oct 2014 • USA (National/Federal)
The Internal Revenue Service recently released final regulations under Section 162(m)(6) of the Internal Revenue Code (IRC), which became effective on September 23, 2014.
The Internal Revenue Service recently released final regulations under Section 162(m)(6) of the Internal Revenue Code (IRC), which became effective on September 23, 2014. IRC Section 162(m)(6) imposes a strict $500,000 annual deduction limit on compensation paid by covered health insurance providers to almost all service providers. There are no exceptions for performance-based compensation or commissions.
Even if a company is not a health insurance issuer, it may be subject to IRC Section 162(m)(6) under the aggregated group rules or as a result of a corporate transaction, as described in the final regulations.
See Practical Law's Practice Note, Section 162(m)(6) of the Code: Limit on Deduction for Compensation Paid by Health Insurers under Health Care Reform for a full description of the final regulations, including important clarifications about treatment following a corporate transaction and application of the aggregated group rules.