Executive Compensation for Tax-Exempt Organizations: New 4960 Rules and IRS Notice 2019-09 Guidance

Deferred compensation and other executive compensation plans and arrangements for tax-exempt organizations differ from those of for-profit entities. New Section 4960 imposes an excise tax on tax-exempt organizations that pay excessive compensation to certain employees. ERISA counsel must understand complex tax rules, reporting requirements, and available planning techniques when structuring executive compensation for tax-exempt organizations.

Under Section 4960, a tax-exempt organization may be subject to a 21 percent excise tax on excessive compensation paid to employees if such compensation exceeds $1 million during the tax year or the aggregate present values of an individual's separation payments and benefits equals or exceeds three times their five-year average pay. Applying Section 4960 involves identifying entities and employees subject to these rules and how parachute payments and aggregation rules can determine if any compensation exceeds the threshold.

Listen as our panel discusses the application of new Section 4960, guidance provided under IRS Notice 2019-09, and practical methods to avoid the 21 percent excise tax.

1. An overview of executive compensation for tax-exempt entities
2. Typical arrangements for executive of tax-exempt entities
3. Code Section 4960 and IRS Notice 2019-09
4. Additional items to consider
   1. Aggregation rules
   2. Excess parachute payments
   3. Reporting requirements
5. Best practices in structuring executive compensation for tax-exempt entities

The panel will review these and other key issues:

• Recognizing the differences in structuring executive compensation arrangements for tax-exempt vs. taxable entities
• Understanding the dynamics of Section 4960 and the 21 percent excise tax
• Determining what entities and employees are subject to Section 4960
• Essential items to consider stemming from IRS Notice 2019-09
• Excess parachute payments and the 21 percent excise tax
• Aggregation rules and key tax planning considerations
• Practical techniques for structuring executive compensation for nonprofit organizations

After completing this course, you will be able to:

• Recognize the differences in structuring executive compensation arrangements for tax-exempt vs. taxable entities
• Determine entities and employees that are subject to Section 4960
• Essential items to consider stemming from IRS Notice 2019-09
• Identify aggregation rules and key tax planning considerations

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ non-profit business or public firm experience at mid-level within the organization, preparing financial statements and/or complex tax forms and schedules, supervising other preparers/accountants. Specific knowledge and understanding of nonprofit and exempt organization reporting requirements; familiarity with highly-compensated and covered employees, aggregation rules, excess parachute payments, and reporting requirements.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).