Over the last decade, the IRS has assumed a broader role in the
governance of tax-exempt organizations and embraced the view that
transparency leads to tax compliance. Nowhere is the IRS s approach
more evident than in the area of executive compensation. The IRS
asks tax-exempt organizations to provide detailed information
annually on their Forms 990 regarding the compensation paid to
executives as well as the compensation policies and practices that
organizations follow. The information submitted can lead to
compliance checks or examinations by the IRS.
In setting executive compensation, each charitable organization
should be aware of the rules that apply to it. Special excise tax
provisions apply to public charities (as well as section 501(c)(4)
social welfare organizations) that provide excessive compensation
to certain persons under the excess benefit transaction rules of
Internal Revenue Code section 4958. The private foundation
self-dealing rules of Internal
