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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 ?Ç£Code?Ç¥), 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 (?Ç£ATEO?Ç¥) 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

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