Final IRS Intermediate Sanctions Regulations: Few Surprises
The Internal Revenue Service ("IRS") issued final intermediate sanctions regulations on January 23, 2002. The new regulations, which replace temporary regulations issued in 2001, contain few surprises and reflect only minor changes from last year’s temporary rules. Like the temporary regulations before them, the final regulations fail to provide any guidance concerning "revenue sharing" transactions.
Background
Congress enacted "intermediate sanctions" in 1996 as Section 4958 of the Internal Revenue Code ("Code"). The provisions were intended to penalize persons who use their influence over tax-exempt organizations in order to derive an impermissible benefit from an organization. Under prior law, the only remedy for such transactions was revocation of the organization’s tax exemption. The 1996 legislation provides an "intermediate" means of addressing improper transactions by penalizing both the persons who benefit from
