Bailout Bill Patches AMT, Limits Executive Pay in Affected Companies

The financial bailout bill contained an Alternative Minimum Tax "patch" that will keep the tax from applying to millions more taxpayers. Because the spread on incentive stock options is subject to the AMT, this means that many incentive option holders will be spared potential additional taxation.

The bill also places some modest, and probably difficult to enforce, limitations on executive pay for companies rescued by the bailout, including a reduction to $500,000 for tax a deductions under Section 162(m) of the Code for companies getting the most direct assistance and limits on golden parachutes for executives of firms participating in the program in any way. Past efforts to limit executive pay have failed as attorneys and boards have found ways around them. Shareholder pressure and economic reality may be more effective constraints.