USC Subchapter D

in effect

26 U.S.C. § 4958 Taxes on excess benefit transactions

(a) Initial taxes(1) On the disqualified personThere is hereby imposed on each excess benefit transaction a tax equal to 25 percent of the excess benefit. The tax imposed by this paragraph shall be paid by any disqualified person referred to in subsection (f)(1) with respect to such transaction. (2) On the managementIn any case in which a tax is imposed by paragraph (1), there is hereby imposed on the participation of any organization manager in the excess benefit transaction, knowing that it is such a transaction, a tax equal to 10 percent of the excess benefit, unless such participation is not willful and is due to reasonable cause. The tax imposed by this paragraph shall be paid by any organization manager who participated in the excess benefit transaction. (b) Additional tax on the disqualified personIn any case in which an initial tax is imposed by subsection (a)(1) on an excess benefit transaction and the excess benefit involved in such transaction is not corrected within the taxable period, there is hereby imposed a tax equal to 200 percent of the excess benefit involved. The tax imposed by this subsection shall be paid by any disqualified person referred to in subsection (f)(1) with respect to such transaction. (c) Excess benefit transaction; excess benefitFor purposes of this section—(1) Excess benefit transaction(A) In generalThe term “excess benefit transaction” means any transaction in which an economic benefit is provided by an applicable tax-exempt organization directly or indirectly to or for the use of any disqualified person if the value of the economic benefit provided exceeds the value of the consideration (including the performance of services) received for providing such benefit. For purposes of the preceding sentence, an economic benefit shall not be treated as consideration for the performance of services unless such organization clearly indicated its intent to so treat such benefit. (B) Excess benefitThe term “excess benefit” means the excess referred to in subparagraph (A). (2) Special rules for donor advised fundsIn the case of any donor advised fund (as defined in section 4966(d)(2))—(A) the term “excess benefit transaction” includes any grant, loan, compensation, or other similar payment from such fund to a person described in subsection (f)(7) with respect to such fund, and (B) the term “excess benefit” includes, with respect to any transaction described in subparagraph (A), the amount of any such grant, loan, compensation, or other similar payment. (3) Special rules for supporting organizations(A) In generalIn the case of any organization described in section 509(a)(3)—(i) the term “excess benefit transaction” includes—(I) any grant, loan, compensation, or other similar payment provided by such organization to a person described in subparagraph (B), and (II) any loan provided by such organization to a disqualified person (other than an organization described in subparagraph (C)(ii)), and (ii) the term “excess benefit” includes, with respect to any transaction described in clause (i), the amount of any such grant, loan, compensation, or other similar payment. (B) Person describedA person is described in this subparagraph if such person is—(i) a substantial contributor to such organization, (ii) a member of the family (determined under section 4958(f)(4)) of an individual described in clause (i), or (iii) a 35-percent controlled entity (as defined in section 4958(f)(3) by substituting “persons described in clause (i) or (ii) of section 4958(c)(3)(B)” for “persons described in subparagraph (A) or (B) of paragraph (1)” in subparagraph (A)(i) thereof). (C) Substantial contributorFor purposes of this paragraph—(i) In generalThe term “substantial contributor” means any person who contributed or bequeathed an aggregate amount of more than $5,000 to the organization, if such amount is more than 2 percent of the total contributions and bequests received by the organization before the close of the taxable year of the organization in which the contribution or bequest is received by the organization from such person. In the case of a trust, such term also means the creator of the trust. Rules similar to the rules of subparagraphs (B) and (C) of section 507(d)(2) shall apply for purposes of this subparagraph. (ii) ExceptionSuch term shall not include—(I) any organization described in paragraph (1), (2), or (4) of section 509(a), and (II) any organization which is treated as described in such paragraph (2) by reason of the last sentence of section 509(a) and which is a supported organization (as defined in section 509(f)(3)) of the organization to which subparagraph (A) applies. (4) Authority to include certain other private inurementTo the extent provided in regulations prescribed by the Secretary, the term “excess benefit transaction” includes any transaction in which the amount of any economic benefit provided to or for the use of a disqualified person is determined in whole or in part by the revenues of 1 or more activities of the organization but only if such transaction results in inurement not permitted under paragraph (3) or (4) of section 501(c), as the case may be. In the case of any such transaction, the excess benefit shall be the amount of the inurement not so permitted. (d) Special rulesFor purposes of this section—(1) Joint and several liabilityIf more than 1 person is liable for any tax imposed by subsection (a) or subsection (b), all such persons shall be jointly and severally liable for such tax. (2) Limit for managementWith respect to any 1 excess benefit transaction, the maximum amount of the tax imposed by subsection (a)(2) shall not exceed $20,000. (e) Applicable tax-exempt organizationFor purposes of this subchapter, the term “applicable tax-exempt organization” means—(1) any organization which (without regard to any excess benefit) would be described in paragraph (3), (4), or (29) of section 501(c) and exempt from tax under section 501(a), and (2) any organization which was described in paragraph (1) at any time during the 5-year period ending on the date of the transaction. Such term shall not include a private foundation (as defined in section 509(a)). (f) Other definitionsFor purposes of this section—(1) Disqualified personThe term “disqualified person” means, with respect to any transaction—(A) any person who was, at any time during the 5-year period ending on the date of such transaction, in a position to exercise substantial influence over the affairs of the organization, (B) a member of the family of an individual described in subparagraph (A), (C) a 35-percent controlled entity, (D) any person who is described in subparagraph (A), (B), or (C) with respect to an organization described in section 509(a)(3) and organized and operated exclusively for the benefit of, to perform the functions of, or to carry out the purposes of the applicable tax-exempt organization, (E) which involves a donor advised fund (as defined in section 4966(d)(2)), any person who is described in paragraph (7) with respect to such donor advised fund (as so defined), and (F) which involves a sponsoring organization (as defined in section 4966(d)(1)), any person who is described in paragraph (8) with respect to such sponsoring organization (as so defined). (2) Organization managerThe term “organization manager” means, with respect to any applicable tax-exempt organization, any officer, director, or trustee of such organization (or any individual having powers or responsibilities similar to those of officers, directors, or trustees of the organization). (3) 35-percent controlled entity(A) In generalThe term “35-percent controlled entity” means—(i) a corporation in which persons described in subparagraph (A) or (B) of paragraph (1) own more than 35 percent of the total combined voting power, (ii) a partnership in which such persons own more than 35 percent of the profits interest, and (iii) a trust or estate in which such persons own more than 35 percent of the beneficial interest. (B) Constructive ownership rulesRules similar to the rules of paragraphs (3) and (4) of section 4946(a) shall apply for purposes of this paragraph. (4) Family membersThe members of an individual’s family shall be determined under section 4946(d); except that such members also shall include the brothers and sisters (whether by the whole or half blood) of the individual and their spouses. (5) Taxable periodThe term “taxable period” means, with respect to any excess benefit transaction, the period beginning with the date on which the transaction occurs and ending on the earliest of—(A) the date of mailing a notice of deficiency under section 6212 with respect to the tax imposed by subsection (a)(1), or (B) the date on which the tax imposed by subsection (a)(1) is assessed. (6) CorrectionThe terms “correction” and “correct” mean, with respect to any excess benefit transaction, undoing the excess benefit to the extent possible, and taking any additional measures necessary to place the organization in a financial position not worse than that in which it would be if the disqualified person were dealing under the highest fiduciary standards, except that in the case of any correction of an excess benefit transaction described in subsection (c)(2), no amount repaid in a manner prescribed by the Secretary may be held in any donor advised fund. (7) Donors and donor advisorsFor purposes of paragraph (1)(E), a person is described in this paragraph if such person—(A) is described in section 4966(d)(2)(A)(iii), (B) is a member of the family of an individual described in subparagraph (A), or (C) is a 35-percent controlled entity (as defined in paragraph (3) by substituting “persons described in subparagraph (A) or (B) of paragraph (7)” for “persons described in subparagraph (A) or (B) of paragraph (1)” in subparagraph (A)(i) thereof). (8) Investment advisorsFor purposes of paragraph (1)(F)—(A) In generalA person is described in this paragraph if such person—(i) is an investment advisor, (ii) is a member of the family of an individual described in clause (i), or (iii) is a 35-percent controlled entity (as defined in paragraph (3) by substituting “persons described in clause (i) or (ii) of paragraph (8)(A)” for “persons described in subparagraph (A) or (B) of paragraph (1)” in subparagraph (A)(i) thereof). (B) Investment advisor definedFor purposes of subparagraph (A), the term “investment advisor” means, with respect to any sponsoring organization (as defined in section 4966(d)(1)), any person (other than an employee of such organization) compensated by such organization for managing the investment of, or providing investment advice with respect to, assets maintained in donor advised funds (as defined in section 4966(d)(2)) owned by such organization.

26 U.S.C. § 4959 Taxes on failures by hospital organizations

If a hospital organization to which section 501(r) applies fails to meet the requirement of section 501(r)(3) for any taxable year, there is imposed on the organization a tax equal to $50,000.

26 U.S.C. § 4960 Tax on excess tax-exempt organization executive compensation

(a) Tax imposedThere is hereby imposed a tax equal to the product of the rate of tax under section 11 and the sum of—(1) so much of the remuneration paid (other than any excess parachute payment) by an applicable tax-exempt organization for the taxable year with respect to employment of any covered employee in excess of $1,000,000, plus (2) any excess parachute payment paid by such an organization to any covered employee. For purposes of the preceding sentence, remuneration shall be treated as paid when there is no substantial risk of forfeiture (within the meaning of section 457(f)(3)(B)) of the rights to such remuneration. (b) Liability for taxThe employer shall be liable for the tax imposed under subsection (a). (c) Definitions and special rulesFor purposes of this section—(1) Applicable tax-exempt organizationThe term “applicable tax-exempt organization” means any organization which for the taxable year—(A) is exempt from taxation under section 501(a), (B) is a farmers’ cooperative organization described in section 521(b)(1), (C) has income excluded from taxation under section 115(1), or (D) is a political organization described in section 527(e)(1). (2) Covered employeeFor purposes of this section, the term “covered employee” means any employee of an applicable tax-exempt organization (or any predecessor of such an organization) and any former employee of such an organization (or predecessor) who was such an employee during any taxable year beginning after December 31, 2016. (3) RemunerationFor purposes of this section:(A) In generalThe term “remuneration” means wages (as defined in section 3401(a)), except that such term shall not include any designated Roth contribution (as defined in section 402A(c)) and shall include amounts required to be included in gross income under section 457(f). (B) Exception for remuneration for medical servicesThe term “remuneration” shall not include the portion of any remuneration paid to a licensed medical professional (including a veterinarian) which is for the performance of medical or veterinary services by such professional. (4) Remuneration from related organizations(A) In generalRemuneration of a covered employee by an applicable tax-exempt organization shall include any remuneration paid with respect to employment of such employee by any related person or governmental entity. (B) Related organizationsA person or governmental entity shall be treated as related to an applicable tax-exempt organization if such person or governmental entity—(i) controls, or is controlled by, the organization, (ii) is controlled by one or more persons which control the organization, (iii) is a supported organization (as defined in section 509(f)(3)) during the taxable year with respect to the organization, (iv) is a supporting organization described in section 509(a)(3) during the taxable year with respect to the organization, or (v) in the case of an organization which is a voluntary employees’ beneficiary association described in section 501(c)(9), establishes, maintains, or makes contributions to such voluntary employees’ beneficiary association. (C) Liability for taxIn any case in which remuneration from more than one employer is taken into account under this paragraph in determining the tax imposed by subsection (a), each such employer shall be liable for such tax in an amount which bears the same ratio to the total tax determined under subsection (a) with respect to such remuneration as—(i) the amount of remuneration paid by such employer with respect to such employee, bears to (ii) the amount of remuneration paid by all such employers to such employee. (5) Excess parachute paymentFor purposes of determining the tax imposed by subsection (a)(2)—(A) In generalThe term “excess parachute payment” means an amount equal to the excess of any parachute payment over the portion of the base amount allocated to such payment. (B) Parachute paymentThe term “parachute payment” means any payment in the nature of compensation to (or for the benefit of) a covered employee if—(i) such payment is contingent on such employee’s separation from employment with the employer, and (ii) the aggregate present value of the payments in the nature of compensation to (or for the benefit of) such individual which are contingent on such separation equals or exceeds an amount equal to 3 times the base amount. (C) ExceptionSuch term does not include any payment—(i) described in section 280G(b)(6) (relating to exemption for payments under qualified plans), (ii) made under or to an annuity contract described in section 403(b) or a plan described in section 457(b), (iii) to a licensed medical professional (including a veterinarian) to the extent that such payment is for the performance of medical or veterinary services by such professional, or (iv) to an individual who is not a highly compensated employee as defined in section 414(q). (D) Base amountRules similar to the rules of 280G(b)(3) shall apply for purposes of determining the base amount. (E) Property transfers; present valueRules similar to the rules of paragraphs (3) and (4) of section 280G(d) shall apply. (6) Coordination with deduction limitationRemuneration the deduction for which is not allowed by reason of section 162(m) shall not be taken into account for purposes of this section. (d) RegulationsThe Secretary shall prescribe such regulations as may be necessary to prevent avoidance of the tax under this section, including regulations to prevent avoidance of such tax through the performance of services other than as an employee or by providing compensation through a pass-through or other entity to avoid such tax.