This excerpt taken from the PNC DEF 14A filed Mar 19, 2009.
Section 162(m) of the Internal Revenue Code disallows, with certain exceptions, a federal income tax deduction for compensation over $1 million paid to each of our CEO and the three highest-paid executive officers other than the CEO and the CFO, provided that they are serving in that capacity as of the last day of our fiscal year. One exception to the deduction disallowance applies to performance-based compensation paid under shareholder-approved plans. Awards made under the 1996 Plan and certain awards under the 2006 Incentive Award Plan (stock options and incentive performance units), are intended to be eligible for the performance-based exception and therefore currently deductible by PNC for federal income tax purposes. Under current SEC and tax rules, the named executive officers are not the same individuals as the executive officers whose compensation is subject to Section 162(m).
Although the Committee keeps in mind the desirability of limiting PNCs non-deductible compensation expense, the Committee also believes that it is equally important to maintain the flexibility and competitive effectiveness of our executive compensation program. Therefore, the Committee may, from time to time, make grants and awards that may not be deductible for federal income tax purposes due to the provisions of Section 162(m).
Due to our participation in the TARP Capital Purchase Program, we are subject to additional limitations under Section 162(m). Section 162(m) as amended for TARP recipients limits our annual deduction for compensation that is attributable to the services of each of our Section 162(m)-covered executives during the period the Treasury holds an equity or debt interest in PNC, regardless of when paid, to $500,000 and eliminates the performance-based exception. As such, absent further changes in applicable law and assuming PNC continues to be a TARP participant, the Committee does not currently intend to award 2009 bonuses (payable in 2010) under the 1996 Plan, but may award 2009 bonuses outside of the 1996 Plan.