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Interim guidance, taxing “excess” executive compensation of exempt organizations

Interim guidance, taxing excess executive compensation

The U.S. tax reform legislation enacted in December 2017 (Pub. L. No. 115-97) created a new excise tax on certain employee compensation and severance payments paid by tax-exempt organizations.


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Section 4960 imposes an excise tax equal to the corporate tax rate (21%) on certain “remuneration” and “excess parachute payments” paid to the five highest compensated employees of certain tax-exempt organizations. Numerous defined terms used in section 4960 were—until recently—undefined or ambiguous, resulting in exempt organizations struggling during the past year in attempting to determine whether and to what extent they are subject to the excise tax. While imposition of the new excise tax under section 4960 has been challenging for these organizations, the uncertainty has been eased with the IRS issuance of Notice 2019-09 that addresses many key outstanding questions and concerns. 

Read a January 2019 report [PDF 133 KB] prepared by KPMG LLP: What’s News in Tax: Interim Guidance on Taxing “Excess” Executive Compensation of Exempt Organizations

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