In a surprise move, the IRS on January 10, 2001 issued temporary, rather than final regulations to replace proposed intermediate sanctions regulations issued in 1998. The regulations' temporary form invites further comments and perhaps revisions before the rules are finalized.
The new regulations provide many new helpful examples, but fail to address revenue sharing arrangements, leaving exempt organizations with no guidance in this challenging area. In their most significant change from the proposed rules, the temporary regulations provide a special exception for initial transactions.
Background
Congress added the intermediate sanctions rules to the Internal Revenue Code in 1996 to impose excise taxes on certain persons who engage in "excess benefit" transactions with Section 501(c)(3) and Section 501(c)(4) organizations. The taxes apply to individuals and entities who are "disqualified persons" with respect to an organization, and also to organization managers such as directors,
