Specifically, the provision allows taxpayers to treat 'honorary officers' as regular employees and not as officers or directors subject to the add-back requirement. A. Add-back Requirement. Under existing law, a corporation must add-back compensation it paid to corporate officers and directors to the extent the corporation deducted it in computing its federal taxable income. There are exceptions for close and S Corporations and corporations with 35 or fewer shareholders. B. Honorary Officers.
Some employees hold honorary officer titles.
They really aren't true officers of the taxpayer in a legal sense. Compensation paid to employees or others holding honorary officer titles shouldn't be included in the earned surplus tax base because they don't have the authority to bind the taxpayer like true officers and directors. C. The Clarification. D. Rebutting the Presumption. A taxpayer may rebut the presumption that a person is an officer if it conclusively shows, through the person's job description or other documentation, that the person does not participate or have authority to participate in significant policy making aspects of the corporate operations.