Expands the federal rule that denies corporate tax deductions for excessive executive pay by rewriting and broadening the law that limits when companies can deduct certain employee compensation. It updates who counts as a “covered individual,” revises what counts as a publicly held corporation for the rule, and gives the Treasury Secretary authority to write regulations to block avoidance (including through pass-through entities).

The changes apply to taxable years beginning after December 31, 2024. Companies, high-paid employees, tax preparers, and payroll/advisory firms will need to review compensation plans and tax reporting to comply and to avoid new limits on deductible compensation.