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ARTICLE · 29 JULY 2016

Changes to Compensation Rules for Tax-Exempt Entities

Poyner Spruill LLP
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Special rules apply to compensation arrangements of tax-exempt entities. If the arrangement does not comply with the rules, then the amount of compensation subject to the arrangement is taxed to the employee as soon as it is vested

United StatesEmployment and HR
Kelsey Mayo
Kelsey Mayo
Kara Brunk
Kara Brunk
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​Special rules apply to compensation arrangements of tax-exempt entities. If the arrangement does not comply with the rules, then the amount of compensation subject to the arrangement is taxed to the employee as soon as it is vested (even if the employee won't receive the money in that year). The IRS just published proposed regulations modifying some of these special rules. The proposed guidance will impact paid time off arrangements, death and disability plans, severance policies, bonus plans, employment agreements, and deferred compensation arrangements of tax-exempt entities.

Here are a couple examples of how the modified rules may affect a tax-exempt entity's compensation arrangements:

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