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Final regulations: Excise tax on excess compensation, parachute payments made by tax-exempt organizations

Final regulations: Excise tax on excess compensation

The IRS today posted to its website a version of the final regulations (T.D. 9938) concerning the excise tax imposed regarding excess tax-exempt organization executive compensation.

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The final regulations [PDF 656 KB] (176 pages) implement section 4960 as added to the Code by the 2017 tax law (Pub. L. No. 115-97)—the law that is often referred to as the “Tax Cuts and Jobs Act” (TJCA).

Section 4960 imposes an excise tax on remuneration in excess of $1 million and any excess parachute payment paid by an applicable tax-exempt organization to any “covered employee.” Section 4960 is effective for tax years beginning after December 31, 2017.

The version of the final regulations released today by the IRS includes the following statement:

This document will be submitted to the Office of the Federal Register (OFR) for publication. The version of the final rule released today may vary slightly from the published document if minor editorial changes are made during the OFR review process. The document published in the Federal Register will be the official document.

Regulations to implement section 4960 were proposed in June 2020. The preamble to the final regulations states that the proposed regulations are adopted with modifications.

The purpose of this report is to provide text of the final regulations.


For more information, contact a tax professional with KPMG’s Washington National Tax practice:

Ruth Madrigal | +1 202 533 8817 | ruthmadrigal@kpmg.com

Preston Quesenberry | +1 202 533 3985 | pquesenberry@kpmg.com

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