Warren Averett Tax Alert: New IRS Guidance on Nonprofits Excise Tax

Written by Megan Randolph, CPA on January 15, 2019

Recently, the IRS issued Notice 2019-99 as interim guidance concerning the new Section 4960 which was enacted with the Tax Cuts and Jobs Act of 2017. Section 4960 imposes a 21% excise tax on compensation in excess of $1 million as well as excess parachute payments made by an “applicable tax exempt organization or related organization to a covered employee” for tax years beginning after December 31, 2017. The notice provides taxpayers with the guidance for applying Section 4960 and also defines several terms, including:

  • Applicable tax-exempt organization;
  • Excess remuneration;
  • Covered employee; and
  • Excess parachute payment.

Furthermore, the notice stated that the tax should be reported and paid annually by using Form 4720, and there is no requirement for quarterly estimated tax payments. Pending any proposed regulations, taxpayers should use a “good faith, reasonable interpretation of the statute” for basing their positions, and any future regulations will be treated prospectively.
If you have questions about how this will impact your organization, please contact your Warren Averett advisor.

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