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Effects of Excess Benefit Transactions on Tax-Exempt Status


by Katie A. Ahern View Biography
Hinckley, Allen & Snyder LLP View Firm Credentials
Providence Office

November 25, 2009

Previously published on November 2009

The Internal Revenue Code imposes an excise tax of up to 225% on certain “disqualified persons,” usually directors and officers, who benefit from a so-called excess benefit transaction with a tax-exempt organization. A disqualified person receives an excess benefit where he or she receives a benefit from an organization that is greater in value than what the person gives in return, as may occur when an officer receives a salary that is greater than what is reasonable for the services performed or when a director purchases property from an organization at a price below fair market value. Other officers or directors may be subject to an excise tax of 10% of the excess benefit if they knowingly participate in an excess benefit transaction, such as by voting to approve the transaction or remaining silent with regard to the transaction.


 

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.


 

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