The Department of Defense (DOD) is America’s oldest and largest government agency with the mission to deter war and to protect the security of the United States. Headquartered in Washington D.C. at the Pentagon, the DOD oversees the four branches of the U.S. military and our national defense. The DOD uses and depends on defense contractors to provide necessary military installations and services. Since 1995, defense contractors had been permitted to expense the compensation of “senior executives” pursuant to a regulatory benchmarking limitation. For employees falling outside the definition of “senior executive,” defense contractors have had the ability to expense any compensation amount. However, in 2012, The National Defense Authorization Act of 2012 expanded the compensation expense limitation from applying only to “senior executives of the contractor” to “any contractor employee” effectively capping the compensation expense for all employees at the statutory amount that previously applied only to senior executive compensation, significantly limiting the ability of defense contractors to expense employee compensation and hurting the ability to recruit and maintain top talent. While the pay limitations are a small part of the overall Defense Authorization Act, which authorizes spending for the subsequent fiscal year, the provision provides an indication of how Congress may treat executive compensation issues, especially those involving federal contractors and tax-related issues, going forward.