L. 2010, H1607 (c. 324), effective as stated, provides that effective January 1, 2010, reasonable compensation deductions may reduce a business organization's taxable business profits below zero for any taxable period only if such Compensation has actually been paid. The amount of the deduction allowed will be determined using the standards set forth in Code Sec. 162(a)(1) .The amount of any deduction claimed for reasonable compensation may also include an amount not to exceed 15% of the gross selling price as commission on the sale of business assets. Each business organization claiming a compensation deduction must provide the following information on a schedule attached to its annual return: the total reasonable compensation deduction claimed by the business organization for the tax year; and the amount of such deduction allocated to each proprietor, partner, or member actually devoting time and effort in the operation of the business organizations entitled to the deduction. Effective for taxable periods beginning on or after January 1, 2011, in lieu of substantiating the value of the personal services of proprietors, partners, or members, a business organization or group of related business organizations may elect, as a record-keeping safe-harbor, to deduct up to $50,000 as total compensation for the tax year. “Record-keeping safe harbor” means that amount of compensation for personal services claimed by a business organization that does not need to be substantiated by any evidence, records, or legal or regulatory authority.

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