Final Regulations On Exempt Organization Excess Compensation Excise Tax

On Monday, January 11, Treasury and the IRS released final regulations under section 4960. Section 4960, enacted as part of the Tax Cuts and Jobs Act (TCJA), imposes an excise tax on remuneration in excess of $1 million and any excess parachute payment paid by an applicable tax-exempt organization (ATEO) to any covered employee. The excise tax and the final regulations can affect not only ATEOs, but also certain entities that are treated as related to those organizations.

In June 2020, Treasury and the IRS published proposed regulations under section 4960. The final regulations retain the basic approach and structure of the proposed regulations, with certain revisions. For prior coverage of the proposed regulations, click here.