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ARTICLE · 10 MAY 2011

IRS Hot Button Issues Put Exempt Organizations at Risk for Penalties

McGuireWoods LLP
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The biggest area of IRS audit concentration regarding noncompliance related to governance issues for tax-exempt groups is executive compensation, according to IRS Director of Exempt Organizations Lois Lerner

United StatesTax
Milton Cerny
Milton Cerny
Jeffrey Capwell
Jeffrey Capwell
Gary Marshall
Gary Marshall

The biggest area of IRS audit concentration regarding noncompliance related to governance issues for tax-exempt groups is executive compensation, according to IRS Director of Exempt Organizations Lois Lerner. If an executive is paid too much, the organization, the executive, the and board members who made the decision to pay the unjustifiable salary risk paying penalties. The IRS is also imposing intermediate sanctions against exempt organizations not treating fringe benefits as income.

Executive Compensation

"It is the board's ultimate responsibility to set executive compensation, and that function should not be delegated to a consultant, specialist, or one individual. A committee of the board can be delegated to do that work, but the full board should be asking many questions when that information is presented," Lerner noted. If an executive is paid too much, not only the organization and the employee, but also the board members who made the decision to pay the

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