Tax - Exempt Organizations Should Review Compensation Packages

The Internal Revenue Service released the final regulations regarding taxation of excess benefit transactions on January 22, 2002. The regulations set forth rules governing transactions between public charities and social welfare organizations, and directors, officers, employees, related organizations and other "insiders". The regulations impose an excise tax on those insiders who receive impermissible benefits from exempt organizations. Although the final regulations offer few significant changes from temporary regulations issued in the past, their release should prompt a comprehensive review of compensation packages and other transactions between tax-exempt organizations and their insiders.