IRS Initiative on Tax-Exempt Organizations' Executive Compensation
08/11/2004The Internal Revenue Service formally announced a "new" enforcement effort to address executive compensation abuses of tax-exempt organizations. This latest announcement is the same initiative that the IRS has been talking about for a few months, although with a few significant new points.
First, the announcement states that the IRS will be contacting nearly 2,000 organizations. This is considerably broader than the scope of the original initiative, which was said to be targeting only those executives with compensation over one million dollars. Second, the purposes of this project are to address the compensation of specific individuals or instances of questionable compensation practices, to learn about practices in reporting compensation on Form 990, and to increase awareness of tax issues as organizations set future compensation. This latter purpose may refer to the timing of inclusion in taxable income of certain compensation and benefits amounts, or to intermediate sanctions issues that might later arise as the result of decisions made now regarding future compensation. Third, the IRS is clearly focused on how compensation is reported on Form 990. They want to know about 990 reporting "practices," which means that organizations need to be able to articulate why they have chosen to report (or not report) certain compensation and benefits items. Many organizations currently handle these issues in an ad hoc manner, with reporting decisions made separately for each 990 filing, and may find it difficult to explain their "practice" of reporting certain items on the 990.
