2018 Proxy Statement

33 TEXTRON 2018 PROXY STATEMENT TAX CONSIDERATIONS Section 162(m) of the Internal Revenue Code provides that no U.S. income tax deduction is allowable to a publicly held corporation for compensation in excess of $1 million paid to a “covered employee” (generally the NEOs). Under the tax law DSSOLFDEOH LQ DQG SULRU \HDUV ³SHUIRUPDQFH EDVHG FRPSHQVDWLRQ´ ZDV H[HPSW IURP WKH PLOOLRQ OLPLWDWLRQ LI LW ZDV SD\DEOH XSRQ PHHWLQJ SUH HVWDEOLVKHG DQG REMHFWLYH SHUIRUPDQFH JRDOV HVWDEOLVKHG E\ WKH &RPPLWWHH XQGHU D SODQ WKDW KDG EHHQ DSSURYHG E\ VKDUHKROGHUV DQG RWKHU WD[ FRGH UHTXLUHPHQWV ZHUH PHW ,Q DGGLWLRQ XQGHU SULRU ODZ WKH SULQFLSDO ¿QDQFLDO RI¿FHU was not treated as a covered employee. 2XU SROLF\ JHQHUDOO\ KDV EHHQ WR VHHN WR TXDOLI\ YDULRXV HOHPHQWV RI WKH FRPSHQVDWLRQ SD\DEOH WR H[HFXWLYHV DV SHUIRUPDQFH EDVHG FRPSHQVDWLRQ DOWKRXJK ZH PD\ SD\ QRQ GHGXFWLEOH FRPSHQVDWLRQ LQ RUGHU WR SUHVHUYH WKH &RPPLWWHH¶V DELOLW\ WR structure our executive compensation program to meet the objectives discussed above, including to reward individual and team performance. Because there are uncertainties as to the application of regulations under Section 162(m), as with most tax matters, LW LV SRVVLEOH WKDW WKH TXDOL¿FDWLRQ RI DZDUGV XQGHU RXU H[HFXWLYH FRPSHQVDWLRQ SURJUDP DV SHUIRUPDQFH EDVHG FRPSHQVDWLRQ for purposes of Section 162(m), and any deductions we have claimed based thereon prior to our 2018 tax year, may be challenged or disallowed. In December 2017, the Tax Cuts and Jobs Act (the “Tax Act”) eliminated the exemption from Section 162(m)’s deduction limit for SHUIRUPDQFH EDVHG FRPSHQVDWLRQ HIIHFWLYH IRU WD[DEOH \HDUV EHJLQQLQJ DIWHU 'HFHPEHU XQOHVV LW TXDOL¿HV IRU WUDQVLWLRQ relief applicable to certain arrangements in place as of November 2, 2017. In addition, the Tax Act broadened the list of covered HPSOR\HHV WR LQFOXGH WKH SULQFLSDO ¿QDQFLDO RI¿FHU $V D UHVXOW RI WKH 7D[ $FW EHJLQQLQJ ZLWK RXU WD[ \HDU FRPSHQVDWLRQ SDLG WR RXU QDPHG H[HFXWLYH RI¿FHUV LQFOXGLQJ SHUIRUPDQFH EDVHG FRPSHQVDWLRQ LQ H[FHVV RI PLOOLRQ JHQHUDOO\ ZLOO QRW EH WD[ GHGXFWLEOH ZLWK WKH H[FHSWLRQ RI FHUWDLQ FRPSHQVDWLRQ SD\DEOH XQGHU DUUDQJHPHQWV LQ SODFH DV RI 1RYHPEHU