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IRS Issues Final Regulations on the Excise Tax Imposed on Executive Compensation Arrangements of Tax-Exempt Organizations | Hodgson Russ LLP


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On January 19, 2021, the Treasury Department and Internal Revenue Service issued final regulations under Code Section 4960 (“Final Regulations”), which impose a 21% excise tax on applicable tax-exempt organizations (“ATEO”) that pay remuneration to covered employees in excess of $1 million or provide excess parachute payments.
The Final Regulations do not depart significantly from the proposed regulations issued in June, 2020, or the interim guidance published in Notice 2019-9 (see our article
Rejection of Grandfathering Existing Agreements
The Section 4960 excise tax applies to compensation that is paid or vests during tax years commencing after December 31, 2017. Unlike Section 162(m), Congress did not provide an express grandfathering provision. Therefore, the Treasury and IRS concluded that it would not be appropriate to include a grandfather rule to protect executive agreements that were in ....

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