A Warning to Nonprofits from Economic Research Institute: IRS Has New Sanctions for Excessive Compensation

A Warning to Nonprofits from Economic Research Institute: IRS Has New Sanctions for Excessive Compensation: "A Warning to Nonprofits from Economic Research Institute: IRS Has New Sanctions for Excessive Compensation

REDMOND, Wash.--(BUSINESS WIRE)--Feb. 17, 2005--According to the ERI Economic Research Institute, the Internal Revenue Service wants to know which executives at tax-exempt organizations (e.g., hospitals, charities, foundations, etc) are receiving excessive compensation. Once the IRS determines who those executives are and how much of their compensation is excessive, the IRS will impose costly intermediate sanctions, warns ERI. These intermediate sanctions can require that top executives at those organizations repay their employers (along with interest and excise penalties of up to 200%) for excessive compensation. In addition, Board members who approved of that excessive compensation and organization managers who knowingly participated in allowing the excessive compensation can be personally fined $10,000 per incident. Tax-exempt organizations have been put on notice, and a number of states are vigorously pursuing nonprofit organizations that pay their executives excessive compensation in advance of the IRS. California has passed a new Nonprofit Integrity Act of 2004 and New York State has a Not-For-Profit Corporation Law, both of which require that tax-exempt organizations take the reviewing and approving of executive compensation seriously. If they do not, they will be subject to non-defensible challenges. "