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April 02, 2009
HR Pros Support 90% Tax on Bonuses at Bailout Firms

Most HR and compensation professionals support a proposed 90 percent tax on bonuses that go to highly paid employees at federal bailout recipients, according to a survey on and

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In March, the U.S House of Representatives voted 328-93 to approve legislation that would impose a 90 percent tax on bonuses that go to highly paid employees at recipients of the Troubled Assets Relief Program (TARP).

In a recent online survey, 57 percent of respondents said they support such a tax, compared with 43 percent who said they didn't. The survey included more than 500 respondents.

Under the legislation (H.R.1586), the 90 percent tax would apply to TARP recipients' bonus payments to employees who have an adjusted gross income exceeding $250,000 ($125,000 in the case of a married individual filing a separate return).

The legislation would exempt any employee who irrevocably waives or returns a bonus payment before the close of the taxable year. The exemption wouldn't apply to any employee who receives any benefit from the employer in connection with the waiver or return of such payment.

The legislation would apply to TARP recipients who received more than $5 billion from the program. Companies that repay the amount that exceeds the $5 billion threshold would be exempt from the tax.

The legislation was approved in the House after news spread of the $165 million in retention bonuses AIG paid to employees in the unit that was primarily responsible for the company's financial troubles.

The legislation has many critics and President Barack Obama hasn't voiced support for it. On April 1, the House passed legislation (H.R. 1664) that would prohibit TARP recipients from giving “unreasonable or excessive” compensation to executives and employees. The legislation would also prohibit bonuses that aren't based on performance-based measures. The definitions of unreasonable compensation, excessive compensation, and performance-based measures would be determined by the Department of Treasury.

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