S. 1576 – Stop Subsidizing Multimillion Dollar Corporate Bonuses Act

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Updated November 24, 2025 at 9:30 PM UTC

The Stop Subsidizing Multimillion Dollar Corporate Bonuses Act expands the tax code’s rules that disallow deductions for overly large executive pay. It widens the categories of people whose compensation can trigger the denial, covering both high‑ranking officers and any individual providing services to a corporation. The bill also updates corporate definitions, grants the Treasury power to issue guidance, and takes effect for tax years starting in 2025.

Key Provisions

Amends Section 162(m) of the Internal Revenue Code to broaden the denial of tax deductions for excessive compensation, replacing terms like “employee” with more general terms such as “individual” and “covered individual.”
Defines “covered individual” to include anyone who provides services to a corporation and also any chief executive or chief financial officer (or similar high‑ranking officer) who was among the three highest‑paid officers in a taxable year after 2016 and whose compensation had to be reported to shareholders.
Updates the definition of a publicly held corporation for these rules, tying it to filing requirements under the Securities Exchange Act.
Gives the Treasury Secretary authority to issue regulations for reporting and to prevent companies from circumventing the rule by routing compensation through pass‑through entities.
Sets the changes to apply to tax years beginning after December 31, 2024.

Legislative Activity

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1 earlier action

SenateIntro Referral Latest Action

Read twice and referred to the Committee on Finance. (Sponsor introductory remarks on measure: CR S2738-2739)

Finance Committee

May 1, 2025

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SenateIntro Referral

Introduced in Senate

May 1, 2025

SenateIntro Referral

Read twice and referred to the Committee on Finance. (Sponsor introductory remarks on measure: CR S2738-2739)

Finance Committee

May 1, 2025

Floor Debate

1 member

What members said about S. 1576 on the floor

1 Democrat

Sen. Jack ReedD-RI · May 1, 2025

Mr. President, I am proud to join Senators Blumenthal, Whitehouse, Merkley, Baldwin, Warren, Van Hollen, and Sanders in introducing the Stop Subsidizing Multimillion Dollar Corporate Bonuses Act. Our…

Mr. President, I am proud to join Senators Blumenthal, Whitehouse, Merkley, Baldwin, Warren, Van Hollen, and Sanders in introducing the Stop Subsidizing Multimillion Dollar Corporate Bonuses Act. Our legislation would finally fully close a loophole that allows publicly traded corporations to deduct the cost of multimillion-dollar bonuses from their corporate tax bills. At a time when the disparity in pay between CEOs and average workers is 290 to 1, there is no justification for forcing U.S. taxpayers to foot the bill for lavish executive compensation packages. But that is what is happening.

Under section 162(m) of the Tax Code, publicly traded corporations cannot deduct more than $1 million in compensation paid to their top executives. Section 162(m), however, does not apply to all employees, and corporations are exploiting this loophole to claim tax deductions for compensation packages for uncovered employees that far exceed $1 million. Indeed, publicly traded corporations are offering these lucrative compensation deals to ever increasing numbers of executives-- not just a few at the very top of the organization--even when revenue growth for these companies slows.

Both Republican and Democratic administrations have recognized the need to close loopholes in section 162(m). In fact, both President Trump and President Biden signed laws based on earlier versions of my legislation to curtail the abuse of this deduction. This includes ensuring that performance-based compensation is actually counted as compensation under section 162(m) and increasing the number of highly paid executives who are subject to section 162(m). Partially tightening the law in these ways has saved taxpayers billions of dollars. But until the loophole is fully closed, taxpayers will continue to be forced to subsidize extravagant compensation.

The Stop Subsidizing Multimillion Dollar Corporate Bonuses Act would address the remaining gaps by applying section 162(m) restrictions to all employees of publicly traded corporations, subjecting all compensation to a deductibility cap of $1 million per employee. The Joint Committee on Taxation has estimated that closing this loophole would save taxpayers nearly $80 billion over 10 years. In other words, taxpayers are currently paying around $8 billion each year to subsidize exorbitant executive pay packages.

To be clear, our bill does not prevent publicly traded corporations from being able to pay their executives as much as they want. These corporations simply won't be able to deduct the portion of the compensation package that exceeds $1 million. This is a matter of fairness. It ensures that corporations and shareholders--not taxpayers--are shouldering the cost of the multimillion dollar compensation packages.

I thank Public Citizen, Americans for Financial Reform, the AFL-CIO, the International Brotherhood of Teamsters, MIT Professor and Nobel Prize Winner Simon Johnson, Take On Wall Street, Americans for Tax Fairness, and the Institute for Policy Studies, Global Economy Project for their support. I urge our colleagues to join us in cosponsoring this legislation and pressing for its passage.

Sen. Jack ReedD-RI · May 1, 2025

Mr. President, I am proud to join Senators Blumenthal, Whitehouse, Merkley, Baldwin, Warren, Van Hollen, and Sanders in introducing the Stop Subsidizing Multimillion Dollar Corporate Bonuses Act. Our…

Mr. President, I am proud to join Senators Blumenthal, Whitehouse, Merkley, Baldwin, Warren, Van Hollen, and Sanders in introducing the Stop Subsidizing Multimillion Dollar Corporate Bonuses Act. Our legislation would finally fully close a loophole that allows publicly traded corporations to deduct the cost of multimillion-dollar bonuses from their corporate tax bills. At a time when the disparity in pay between CEOs and average workers is 290 to 1, there is no justification for forcing U.S. taxpayers to foot the bill for lavish executive compensation packages. But that is what is happening.

Under section 162(m) of the Tax Code, publicly traded corporations cannot deduct more than $1 million in compensation paid to their top executives. Section 162(m), however, does not apply to all employees, and corporations are exploiting this loophole to claim tax deductions for compensation packages for uncovered employees that far exceed $1 million. Indeed, publicly traded corporations are offering these lucrative compensation deals to ever increasing numbers of executives-- not just a few at the very top of the organization--even when revenue growth for these companies slows.

Both Republican and Democratic administrations have recognized the need to close loopholes in section 162(m). In fact, both President Trump and President Biden signed laws based on earlier versions of my legislation to curtail the abuse of this deduction. This includes ensuring that performance-based compensation is actually counted as compensation under section 162(m) and increasing the number of highly paid executives who are subject to section 162(m). Partially tightening the law in these ways has saved taxpayers billions of dollars. But until the loophole is fully closed, taxpayers will continue to be forced to subsidize extravagant compensation.

The Stop Subsidizing Multimillion Dollar Corporate Bonuses Act would address the remaining gaps by applying section 162(m) restrictions to all employees of publicly traded corporations, subjecting all compensation to a deductibility cap of $1 million per employee. The Joint Committee on Taxation has estimated that closing this loophole would save taxpayers nearly $80 billion over 10 years. In other words, taxpayers are currently paying around $8 billion each year to subsidize exorbitant executive pay packages.

To be clear, our bill does not prevent publicly traded corporations from being able to pay their executives as much as they want. These corporations simply won't be able to deduct the portion of the compensation package that exceeds $1 million. This is a matter of fairness. It ensures that corporations and shareholders--not taxpayers--are shouldering the cost of the multimillion dollar compensation packages.

I thank Public Citizen, Americans for Financial Reform, the AFL-CIO, the International Brotherhood of Teamsters, MIT Professor and Nobel Prize Winner Simon Johnson, Take On Wall Street, Americans for Tax Fairness, and the Institute for Policy Studies, Global Economy Project for their support. I urge our colleagues to join us in cosponsoring this legislation and pressing for its passage.

Bill Text

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Introduced in SenateIssued May 1, 2025

II

119th CONGRESS

1st Session

S. 1576

IN THE SENATE OF THE UNITED STATES

May 1, 2025

Mr. Reed (for himself, Mr. Blumenthal, Ms. Baldwin, Ms. Warren, Mr. Merkley, Mr. Van Hollen, Mr. Sanders, and Mr. Whitehouse) introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to expand the denial of deduction for certain excessive employee remuneration, and for other purposes.

1.

Short title

This Act may be cited as the Stop Subsidizing Multimillion Dollar Corporate Bonuses Act.

2.

Expansion of denial of deduction for certain excessive employee remuneration

(a)

In general

(1)

Expansion

Section 162(m) of the Internal Revenue Code of 1986 is amended—

(A)

by striking applicable employee remuneration each place it appears in paragraphs (1), (4), and (5)(E) and inserting applicable remuneration,

(B)

by striking covered employee each place it appears in paragraphs (1) and (4) and inserting covered individual, and

(C)

by striking employee each place it appears in paragraph (1) and subparagraphs (A), (C)(ii), and (E) of paragraph (4) and inserting individual.

(2)

Covered individual

Paragraph (3) of section 162(m) of such Code is amended to read as follows:

(3)

Covered individual

For purposes of this subsection, the term covered individual means—

(A)

any individual who performs services (directly or indirectly) for the taxpayer (or any predecessor) for any taxable year beginning after December 31, 2024, or

(B)

any employee—

(i)

who was the principal executive officer or principal financial officer of the taxpayer (or any predecessor) at any time during any preceding taxable year beginning after December 31, 2016, and before January 1, 2025, or who was an individual acting in such a capacity, or

(ii)

the total compensation of whom for any taxable year described in clause (i) was required to be reported to shareholders under the Securities Exchange Act of 1934 by reason of such individual being among the 3 highest compensated officers for the taxable year (other than any individual described in clause (i)).

Such term shall include any employee who would be described in subparagraph (B)(ii) if the reporting described in such subparagraph were required as so described.

.

(3)

Conforming amendments

(A)

The heading for section 162(m) of the Internal Revenue Code of 1986 is amended by striking employee.

(B)

The heading for section 162(m)(4) is amended by striking employee.

(b)

Modification of definition of publicly held corporation

Section 162(m)(2) of the Internal Revenue Code of 1986 is amended—

(1)

by inserting , with respect to any taxable year, after means, and

(2)

by striking subparagraph (B) and inserting the following:

(B)

that was required to file reports under section 15(d) of such Act (15 U.S.C. 78o(d)) at any time during the 3-taxable year period ending with such taxable year.

.

(c)

Regulatory authority

(1)

In general

Section 162(m) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

(7)

Regulations

The Secretary may prescribe such guidance, rules, or regulations as are necessary to carry out the purposes of this subsection, including regulations—

(A)

with respect to reporting, and

(B)

to prevent avoidance of the purposes of this section by providing compensation through a pass-through or other entity.

.

(2)

Conforming amendment

Paragraph (6) of section 162(m) of such Code is amended by striking subparagraph (H).

(d)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2024.