Excessive employee remuneration from controlled group members and allocation of deduction

(a) Application of aggregation rules Section 162(m) is amended by adding at the end the following new paragraph: (7) Remuneration from controlled group members (A) In general In the case of any publicly held corporation which is a member of a controlled group— (i) paragraph (1) shall be applied by substituting specified covered employee for covered employee, and (ii) if any person which is a member of such controlled group (other than such publicly held corporation) provides applicable employee remuneration to an individual who is a specified covered employee of such controlled group and the aggregate amount described in subparagraph (B)(ii) with respect to such specified covered employee exceeds $1,000,000— (I) paragraph (1) shall apply to such person with respect to such remuneration, and (II) paragraph (1) shall apply to such publicly held corporation and to each such related person by substituting the allocable limitation amount for $1,000,000. (B) Allocable limitation amount For purposes of this paragraph, the term allocable limitation amount means, with respect to any member of the controlled group referred to in subparagraph (A) with respect to any specified covered employee of such controlled group, the amount which bears the same ratio to $1,000,000 as— (i) the amount of applicable employee remuneration provided by such member with respect to such specified covered employee, bears to (ii) the aggregate amount of applicable employee remuneration provided by all such members with respect to such specified covered employee. (C) Specified covered employee For purposes of this paragraph, the term specified covered employee means, with respect to any controlled group— (i) any employee described in subparagraph (A), (B), or (D) of paragraph (3), with respect to the publicly held corporation which is a member of such controlled group, and (ii) any employee who would be described in subparagraph (C) of paragraph (3) if such subparagraph were applied by taking into account the employees of all members of the controlled group. (D) Controlled group For purposes of this paragraph, the term controlled group means any group treated as a single employer under subsection (b), (c), (m), or (o) of section 414.. (b) Effective date The amendment made by this section shall apply to taxable years beginning after December 31, 2025.