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DISCLAIMER: This blog is published for general information only - it is not intended to constitute legal advice and cannot be relied upon by any person as legal advice.  U.S. Treasury Regulations require us to notify you that any tax-related material in this blog (including links and attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding tax penalties, and may not be referred to in any marketing or promotional materials.  While we welcome you to contact our authors, the submission of a comment or question does not create an attorney-client relationship between the Firm and you. 

Entries in Exempt Organizations (10)

Tuesday
Mar262019

IRS Guidance Regarding the Section 4960 Excise Tax Is (Somewhat) Helpful

IRS Notice 2019-09 provides guidance intended to help “applicable tax-exempt employers” determine whether compensation paid to their most highly compensated employees will be subject to the 21 percent excise tax imposed under Code Section 4960.  Notice 2019-09 is indeed helpful to those of us who have to interpret the provisions of Code Section 4960.  But tax-exempt employers subject to Code Section 4960 have serious work to do in order to comply with these relatively new rules, and some tax-exempt employers will be disappointed in the results.  (In general, compensation paid by a Section 501(c)(3) organization will be subject to the requirements of Code Section 4960, so we will simply reference tax-exempt employers for these purposes.)

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Tuesday
Feb202018

Controlled Group Rules for Tax Exempt Organizations: A Brief Review

Corporate entities under common control are generally treated as a single employer for purposes of applying the core rules that govern employee benefit plans and executive compensation arrangements.  For that reason, a complete and accurate controlled group analysis can be critical in determining and monitoring the legal compliance status of a benefit plan.  For example, subject to a couple of exceptions, nondiscrimination testing typically must be performed on a controlled group basis.  A controlled group analysis is needed to determine whether a retirement plan covering more than one employer is a single employer plan or a multiple employer, and whether a group health plan that covers more than one employer is a single employer plan or a multiple employer welfare arrangement (or MEWA).  A controlled group analysis is also critical to identify which members of a group of related entities can be held jointly and severally liable for pension plan underfunding liabilities. 

The controlled group rules should be considered any time there have been (or are expected to be) changes in the composition of the group, particularly if a new member organization is added.  The rules that govern the determination of control relationships among organizations exempt from tax under Code Section 501(a) – “tax-exempt organizations” – are found in Treasury Regulations Section 1.414(c)-5.  Given the pace of change in the tax-exempt world, particularly among local and regional health systems, we think these rules worth revisiting. 

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Tuesday
Jan022018

Tax Reform: A Brief Overview of the Final Legislation

Congress passed the Tax Cuts and Jobs Act on December 20, 2017 and President Trump signed the bill into law on December 22nd. As everyone knows by now, the new law makes sweeping changes affecting most areas of income taxation. And while the final legislation contained fewer provisions affecting employee benefit plans and executive compensation than the original House Bill, employers will still be faced with a number of significant changes in law - most of which can fairly be characterized as revenue raisers - that will require careful review of their current arrangements. 

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Tuesday
Nov072017

House Tax Bill Targets Deferred Compensation Earned After January 1, 2018 (Really)

It’s early days yet for the Tax Cuts and Jobs Act released last week by the House Ways and Means Committee, but one thing is clear:  Congressional tax writers are scouring the landscape to find a combination of more revenue and accelerated revenue from various sources in order to pay for the substantial cuts in income taxes promised by the House Bill.  House Republicans wisely decided against the “Rothification” of 401(k) plans, which would have generated revenue by reducing or limiting opportunities for pre-tax deferrals under the most prevalent retirement savings vehicle maintained by employers and would also have generated consternation from most industry and employee groups.  But a variety of other tax-favored benefit programs and benefit plan features are being scrutinized for curtailment, including deferred compensation arrangements.  In fact, the proposals contained in the House Bill regarding deferred compensation and executive compensation are nothing short of earthshaking.   Specifically, the House Bill would sweep away the elaborate framework of rules that currently govern various types of deferred compensation arrangements and would also make significant changes to the rules relating to the deduction of executive compensation by public companies. 

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Wednesday
Jul132016

Proposed Regulations Create (Some) Executive Compensation Design Opportunities for Tax-Exempt Employers

It has been a long time coming (nine years to be exact), but the Treasury Department has at last published proposed regulations that harmonize important concepts governing deferred compensation arrangements under Code Section 409A and Code Section 457.  The proposed regulations contain no major surprises that would shake up the world of deferred compensation for tax-exempt employers.  But the proposed regulations do provide important new rules under Code Section 457 that: (1) explain the meaning of “substantial risk of forfeiture”; (2) develop existing regulations regarding plans that are not subject to Code Section 457; and (3) help calculate amounts to be included in income under the Code Section 457 tax regime.  The new proposed regulations provide greater clarity regarding these important concepts and can be said to offer new opportunities to tax-exempt employers in designing certain types of executive compensation arrangements (or perhaps, more accurately, resurrect design elements that have fallen into disuse).

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