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IRS Releases Proposed Rule on Executive Compensation for Tax-Exempt Organizations; Relief for Certain Employees Who Volunteer

On June 11, 2020, the IRS published a proposed rule under Section 4960 of the Internal Revenue Code (the “Code”), which was added to the Code by Section 13602 of the Tax Cuts and Jobs Act. Under Section 4960 of the Code, during a taxable year, an applicable tax-exempt organization (“ATEO”) that pays to certain of its highest compensated employees remuneration in excess of $1,000,000 or any excess parachute payments would be subject to a 21% excise tax on the excess remuneration and excess parachute payments. Prior to the proposed rule, the IRS issued Notice 2019-09, which provided interim guidance on Section 4960. The proposed rule generally incorporates the guidance in Notice 2019-09. However, in response to comments received on Notice 2019-09, the proposed rule makes certain modifications and clarifications to the initial guidance. Notably, the proposed rule includes an exception so that employees of a related non-ATEO who provide… Continue Reading

June 2020
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