S. 1576: Stop Subsidizing Multimillion Dollar Corporate Bonuses Act

S. 1576, the Stop Subsidizing Multimillion Dollar Corporate Bonuses Act, builds on a rule that's been in the tax code for years: a public company can't deduct more than $1 million of what it pays any one of its top executives. Pay them more than that, and the company eats the tax on the excess instead of writing it off.

The problem the sponsors point to is how narrow that cap is. It applies only to a short list of named officers — the CEO, the chief financial officer, and a few of the highest-paid. Companies can shift compensation around, route it through other people, or restructure who counts as a covered officer to keep more of it deductible.

This bill widens the net. Instead of a handful of "covered employees," the cap would apply to any "covered individual" — anyone who performs services for the company, directly or indirectly. That language is broad enough to reach outside consultants and service arrangements, not just people on the payroll.

It also reaches backward. Anyone who served as a company's top executive or ranked among its three highest-paid officers between 2017 and the end of 2024 would stay covered, so a company couldn't escape the limit just because someone changed titles or left.

Two more changes close common workarounds. The bill broadens which companies count as "publicly held," and it tells the Treasury Department to write rules stopping businesses from routing pay through pass-through entities to dodge the limit.

None of this caps what executives can earn. It changes only what a company can deduct, and it would apply to compensation in tax years starting after December 31, 2024.