IRS Issues Proposed Regulations on Excise Tax for Tax-Exempt Organizations

On Friday, June 5, the Internal Revenue Service (IRS) and the U.S. Department of the Treasury (the Treasury) released proposed regulations that would provide comprehensive guidance for Section 4960 of the Internal Revenue Code (IRC) regarding the excise tax required for excess executive compensation for tax-exempt organizations.

The excise tax for such tax-exempt organizations is at the current rate of 21 percent when the compensation of a “covered employee” exceeds $1 million and/or is an excess parachute payment.  

The proposed regulations are meant to provide clarity to details regarding excess remuneration, parachute payments, allocation of liability for the excise tax among related organizations and whether volunteers can trigger the tax if they are also employees of related taxable organizations.

Comments on the proposed regulations are due within 60 days after they appear in the Federal Register, which is scheduled for June 11, 2020.

For questions about the excise tax, please contact our team at nonprofit@dhg.com.

ABOUT THE AUTHORS

Amy Bibby
Office Managing Partner, Asheville
Amy.Bibby@dhg.com
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