Nonprofit Executive Compensation: 3 Steps to Ensure Compliance

By Kimberly KeatingWhite PapersComments are off

The IRS is very serious about preventing excessive compensation of nonprofit executives and officers. The IRS has increased its examination of compensation packages and employee benefits in tax-exempt organizations and is exercising Section 4958 of IRC to sanction more “disqualified persons” and organizational transactions. Despite the fact that Intermediate Sanctions have been around since 1996, with the final regulations implemented in 2002, more nonprofit organizations are now realizing the importance of paying attention to their executive compensation and governance practices. The increasing concern regarding Intermediate Sanctions are due in large part to the additional compensation disclosure requirements on the Form 990 and the 2008 economic downturn. To alleviate the concerns of nonprofit organizations, there are a number of steps nonprofits can take to verify “reasonable” compensation and avoid scrutiny.

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