MFA Letter on Excise Tax for Tax-Exempt Organizations

On May 3, MFA submitted a comment letter to Treasury and the IRS responding to their interim guidance under Section 4960, which applies an excise tax on tax-exempt organizations and their related organizations for compensation of covered employees in excess of $1 million and for excess parachute payments.  In the letter, we encouraged Treasury to narrow its interpretation of Section 4960 in two respects.

  • First, MFA encouraged Treasury to provide guidance that an officer of a tax-exempt organization who provides a de minimis amount of services to the organization without direct or indirect compensation is not an employee or covered employee of the organization for purposes of Section 4960.
  • Second, MFA encouraged Treasury to provide guidance that the excise tax will not apply when employees of a related organization provide services to a tax-exempt organization without compensation but receive compensation from the related organization for services provided to the related organization.