Executive Compensation and Changes to Tax Regulations Impacting the Cannabis Industry

GPT

In the rapidly evolving cannabis industry, strategic executive compensation is crucial for attracting top talent and ensuring regulatory compliance. The Tax Cuts and Jobs Act (TCJA) has significantly impacted the tax deductibility of executive pay, eliminating the performance-based exception for compensation over $1 million. This change, coupled with complex accounting for equity awards under ASC Topic 718, requires cannabis companies to navigate carefully through these financial and regulatory landscapes to optimize their tax positions and maintain financial robustness.

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Guidance Issued on Payroll Tax Deferral for Cannabis Companies

The IRS issued much-anticipated guidance on the payroll tax deferral that was ordered by President Donald Trump in a presidential memorandum on Aug. 8 (Notice 2020-65). The notice allows employers to defer withholding on affected employees’ compensation during the last four months of 2020 and then withhold those deferred amounts during the first four months of 2021.

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