Update on IRS Exempt Organization Compensation Review

In public comments made earlier this week, senior Internal Revenue Service (IRS) officials shared a series of significant observations arising from the IRS' current focus on exempt organization executive compensation arrangements. This focus has involved more than 1,200 "compliance check letters" sent to exempt organizations and more than 600 examinations. These observations (and our related analysis) include the following:

• Delegation of compensation decisions to a dedicated executive compensation committee will not absolve the entire board of directors from its responsibility for oversight of compensation decisions.
This position is consistent with the recommendation made this summer by the Panel on the Nonprofit Sector in its final report to Congress and emphasizes the need for transparency in reporting committee decisions to the full board.

• Compensation decisions should only be made by disinterested board members.