Exempt Organizations Advisory - Compensation Compliance Initiative and New Form 990

On April 28, IRS officials spoke at Georgetown University Law Center’s conference on exempt organizations regarding a new Form 990 and the progress of the IRS’s Compensation Compliance Team.

According to reports, officials at the meeting said that proposals for a new Form 990 will include questions requesting information on the compensation of former officers, paid vacation that is cashed out upon retirement, and other forms of deferred compensation. Officials say that IRS Chief Counsel attorneys are designing the form with the intent of "eliciting more comprehensive and more transparent reporting of compensation." It is our understanding that the IRS will wait to see whether the Senate Finance Committee makes any changes that impact the Form 990 before it finalizes a revised form.

Also, a member of the IRS’s Compensation Compliance Team discussed the team’s excessive compensation compliance project. According to the IRS official, the IRS has reviewed responses from 500 of the more than 1,000 letters that it sent to organizations seeking detailed compensation information. The remaining responses are to be reviewed by July 1. To date, 65 organizations have been identified for audit as a result of this initiative. The IRS intends to send letters to another 1,000 organizations.

Other issues to which the IRS is paying special attention include deferred compensation accruals, transfers of intellectual property from tax-exempt organizations to their for-profit affiliates, excess benefits to spouses of executives, and the spreading of an executive’s compensation among a group of related tax-exempt or for-profit organizations.

For more information on this topic, please contact Catherine W. Wilkinson or Suzanne Ross McDowell.

The Exempt Organization Advisory is a general summary of the law and is not intended as specific legal advice for any organization.

Internal Revenue Service - Circular 230 Disclosure: As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

For more information on this topic, please contact the authors or the attorneys with whom you usually work at Steptoe.

Questions and comments about the Exempt Organizations Advisory are always welcome and should be sent to bstone@steptoe.com.