Tax-exempt organizations that pay excess parachute payments or remuneration in excess of $1 million for a taxable year to “covered employees” need to be aware of a recently announced IRS compliance strategy.
On November 5, the IRS’s Tax Exempt & Government Entities Division (TE/GE) released its Fiscal Year 2021 program letter and new compliance webpage. According to the webpage, one area of TE/GE focus for the 2021 fiscal year is compliance with Internal Revenue Code section 4960. Section 4960 imposes a 21 percent excise tax on “excess remuneration” (remuneration that exceeds $1 million for a taxable year) and “excess parachute payments” paid by an applicable tax-exempt organization to certain “covered employees” during a taxable year. Section 4960 applies to taxable years beginning after December 31, 2017.