Structuring Compensation Arrangements for Nonprofit Executives: New Tax Bill Provisions, Section 4960, Excise Tax

Deferred compensation and other executive compensation plans and arrangements for tax-exempt organizations differ from those of for-profit entities. In particular, the requirements to maintain tax-exempt status and the “intermediate sanctions” excise tax regime under Section 4958 impose reasonableness requirements for total compensation, special timing rules under Section 457 limit the ability to defer compensation, and Section 4960 imposes an excise tax on compensation to certain employees in excess of $1 million, as well as on separation payments that equal or exceed three times an employee’s average pay over the preceding five years. ERISA counsel must understand complex tax rules, detailed reporting requirements, and available planning techniques when structuring executive compensation for tax-exempt organizations.

Listen as our panel discusses the special rules for tax-exempt entities and practical methods to recruit and retain talent while avoiding tax surprises.

I. Overview of key tax considerations for compensation to employees of tax-exempt organizations

II. Entities and employees subject to Sections 457, 4958 and 4960

III. Additional items to consider

A. “Covered employees” and “disqualified persons”

B. Aggregation rules

C. Traps for deferred compensation and separation payments

D. Reporting requirements

IV. Best practices in structuring executive comp for tax-exempt entities

The panel will review these and other key issues:

·      Recognizing the differences in structuring executive comp arrangements for tax-exempt vs. taxable entities

·      Understanding the dynamics of maintaining tax-qualified status, avoiding intermediate sanctions, and mitigating the 21 percent excise tax under Section 4960

·      Determining what entities and employees are subject to the special tax rules

·      Aggregation rules and key tax planning considerations

·      Practical techniques for structuring executive comp for nonprofits

·      Potential impact of the new tax bill

Learning Objectives

After completing this course, you will be able to:

• Recognize the differences in structuring executive comp 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).