Executive Compensation is Under Scrutiny
Recent economic woes have resulted in many changes by the federal government. One such area is executive compensation. Senator Grassley has proposed changes to requirements for nonprofit compensation. The IRS recently conducted studies of public charities and exempt hospitals and, in general, found very high salaries. The IRS may revoke the organization's tax exemption for excess compensation. A more likely result is for the IRS to impose intermediate sanctions. Intermediate sanctions are excise taxes applied to any amount of excess compensation. You can see from the magnitude of the penalties that you should take steps to avoid compensating executives at a rate above market. Here are some steps you can take to avoid penalties: 1. Form a compensation committee. 2. Prepare proper documentation. 3. Collect comparability data. 4. Monitor activities. 5. Document fringe benefits. 6. Be on the lookout for IRS changes to compensation requirements.
English, Tom. (2010). "Executive Compensation is Under Scrutiny". Nonprofit World, 28(5), 20-21.