AICPA Recommends Additional Guidance on Nonprofit Exec Compensation

March 13, 2020

The Tax Cuts and Jobs Act of 2017 added section 4960 to the Internal Revenue Code, imposing a 21-percent excise tax on the amount of remuneration in excess of $1 million and any excess parachute payment paid by an applicable tax-exempt organization (“ATEO”) to a covered employee. Approximately one year later, the IRS issued Notice 2019-19 to provide interim guidance with respect to section 4960, including definitions of ATEO, covered employee, and remuneration and clarifying the effective date of the new tax and how to allocate the tax between related organizations. On February 19, 2020, the American Institute of CPAs (“AICPA”) submitted comments and recommendations regarding additional guidance pertaining to section 4960 with hopes of influencing any future proposed regulations. The AICPA letter included suggestions on how to allocate remuneration and tax liability between related organizations, a recommendation that certain officers and directors should not automatically be included in the definition of covered employee, and potential ways to simplify the calculation of remuneration in general.

Click here to see the AICPA’s letter in full.