Structuring Executive Compensation for Tax-Exempt Organizations: High Stakes, High Scrutiny, and How to Avoid IRS Penalties

This session introduces the foundational tax principles unique to executive compensation at tax-exempt organizations. Topics include anti-inurement principles, the risk of losing tax-exempt status, and the Section 4960 excise tax framework that creates parity with public companies.

Explore which organizations and individuals fall under Sections 457, 4958, and 4960. This session covers disqualified persons, covered employees, applicable tax-exempt organizations (ATEOs), and the critical rules governing related organizations.

Learn how to evaluate reasonable compensation and avoid intermediate sanctions under Section 4958. This session details the rebuttable presumption of reasonableness, required documentation, and key considerations for designing compliant incentive compensation arrangements.

Understand the 21% excise tax on compensation exceeding $1 million and excess parachute payments. This session covers the expanded definition of covered employees under recent legislation, calculation methods, the medical services exception, and allocation rules for related organizations.

Examine the rationale behind Section 457 and the key distinctions between eligible 457(b) plans and ineligible 457(f) arrangements. This session covers short-term deferral exceptions, bona fide severance rules, and strategic plan design considerations including split dollar life insurance.

Navigate the complex reporting requirements for executive compensation on Form 990 Schedules A and J. Learn about the 457(f) double-reporting trap and understand which items require disclosure versus those that may be excluded.

Apply a practical three-bucket framework addressing governance, design, and negotiation considerations. This session provides actionable recommendations on benchmarking, tracking covered employees, simplifying deferred compensation, and managing board dynamics effectively.