Non-Profit Organizations: Avoiding, Correcting and Reporting Excess Benefit Transactions

Recording of a 110-minute CPE/CLE webinar with Q&A

Conducted on Tuesday, June 30, 2015

Recorded event now available

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Program Materials

This webinar will prepare tax advisers and counsel for tax-exempt organizations to identify, remedy and report excess benefit transactions and to minimize excise tax and other sanctions arising from prohibited transactions. The panel will review different types of excess benefit transactions, and identify potential disqualified persons, tax penalties and revocation standards. The program will also discuss recent case law developments.

Description

IRC Sections 501(c)(3) and (c)(4) set forth the requirements for qualifying as a tax-exempt charity or social welfare organization. The Code requires that “no part of the net earnings” of the organization “inures to the benefit of any private shareholder or individual.” Under IRC Section 4958, the IRS may impose taxes on any “excess benefit transaction” that occurs between the applicable tax-exempt organization and any “disqualified person” of the organization.

Transactions subject to the rules include, among other things, salary, independent contractor payments, revenue-sharing models, transfers of property, payment of insurance premiums and other payments, and transfers to family members or affiliated businesses. Excess benefit transactions put an organization’s tax-exempt status at risk and could result in costly excise taxes for the recipient of the excess benefit and, in some cases, the managers who approved the transaction. Improper transactions must be corrected and reported to the IRS; voluntary reporting can mitigate tax penalties.

Listen as our experienced panel discusses the IRS excess benefit transaction rules, disqualified persons, the penalty taxes and revocation factors. The panel will also analyze its application of the rules to donor-advised funds, and offer tax planning best practices to avoid violating the excess benefit transaction rules.

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Outline

  1. IRC excess benefit transactions
    1. Section 4598 excise taxes
    2. Automatic excess benefits
    3. Disqualified persons
  2. Remedying excess benefit transactions
  3. Form 990 reporting requirements and disclosures
  4. Planning strategies
  5. Donor-advised funds and supporting organizations

Benefits

The panel will review these and other key questions:

  • What constitutes an excess benefit transaction and a disqualified person for a 501(c)(3) or 501(c)(4) organization?
  • What steps can these organizations take to avoid excess benefit transactions?
  • What are the reporting requirements and how should potential EBTs be disclosed on the organization’s Form 990?
  • What factors does the IRS consider in determining whether to revoke an organization’s tax-exempt status?

Faculty

David A. Levitt
David A. Levitt
Principal
Adler and Colvin

Mr. Levitt’s practice focuses on the representation of nonprofit and tax-exempt organizations, with an emphasis...  |  Read More

Joel Beck-Coon, Esq.
Joel Beck-Coon, Esq.
Adler & Colvin

Mr. Beck-Coon’s practice focuses on the representation of non-profit and tax-exempt organizations and individual...  |  Read More

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