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Executive Compensation for Tax Exempt Organizations: New 4960 Regs, Covered Employees, Donated Services, Aggregation

Navigating IRC Rules and Regulations in Structuring Compensation for Nonprofits

Note: CPE credit is not offered on this program

Recording of a 90-minute premium CLE webinar with Q&A

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Conducted on Wednesday, September 30, 2020

Recorded event now available

or call 1-800-926-7926

This CLE course will provide ERISA counsel and advisers an in-depth analysis of the executive compensation rules and challenges for tax exempt organizations. The panel will discuss key provisions of new IRS proposed regulations for Section 4960, determining covered employees, aggregation rules, and issues stemming from donated services. The panel will also discuss structuring restricted stock awards, drafting grant agreements, analyzing substantial risk of forfeiture under IRC Section 83, handling 83(b) elections, and more.

Description

Section 4960 imposes an excise tax on certain excess executive compensation paid by a tax exempt organization to certain covered employees. The IRS issued regulations under Section 4960 providing clarity to "covered employees" with some exceptions. ERISA counsel and advisers must recognize key provisions of the recent regulations, along with other considerations under Section 83, Section 162, and golden parachute rules.

Section 4960 imposes an excise tax equal to the corporate tax rate, which is currently 21 percent, on covered employee's pay that exceeds $1 million or is treated as an excess parachute payment. Recent IRS regulations provide exceptions to the application of Section 4960, such as the (1) limited hours exception, (2) nonexempt funds exception, and (3) limited services exceptions. All of which have strict requirements in order to avoid being subject to an excise tax.

Section 83 of the IRC and Treasury regulations govern the tax consequences of restricted property, including restricted stock awards. Under the recent regulations, the transfer of Section 83 property is considered a payment made in the taxable year in which it is transferred or would be includible in the gross income of the covered employee under Section 83, regardless of any election made by the employee under Section 83(b) or (i).

Counsel must understand the Treasury regulations to structure, draft, and implement restricted stock awards or other compensation arrangements.

Listen as our authoritative panel discusses important topics such as the impact of recent IRS regulations for Section 4960, substantial risk of forfeiture, income recognition, IRC Section 83(b) elections, withholding requirements, Section 162, and golden parachute rules.

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Outline

  1. Executive compensation options for nonprofits
  2. Section 4960; recent regulations and applicability
  3. Applicability of Section 83 and 83(b) elections
  4. Integration of other tax provisions
  5. Best practices and practical considerations, practice pointers, and drafting tips for counsel

Benefits

The panel will review these and other key issues:

  • What are the key provisions of new IRS regulations for Section 4960?
  • What are the critical factors in determining "covered employees" for purposes of Section 4960?
  • How do the aggregation rules apply?
  • What issues arise from donated services?
  • What are the crucial implications of Section 83?
  • What issues arise in regards to Section 83(b) election and the latest guidance from the IRS?
  • How is restricted stock treated under other relevant provisions of the Code?
  • What are the practical considerations, practice pointers, and drafting tips for counsel?

Faculty

Downing, Jake
Jake R. Downing
Partner
Seyfarth Shaw

Mr. Downing is experienced in counseling clients on qualified and nonqualified retirement and welfare plan matters...  |  Read More

Moran, Christopher
Christopher N. Moran
Attorney
Venable

Mr. Moran focuses primarily on tax planning and nonprofit law. Chris assists clients with planning significant...  |  Read More

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