IRS Report on Exempt Organizations Executive Compensation Compliance Project (March 2007)   (link)

From the introduction to the report:

In 2004, the Internal Revenue Service, through the Exempt Organizations Office of the Tax Exempt and Government

Entities Division (EO), implemented the Executive Compensation Compliance Initiative (the Project). The Project

encompassed Forms 990 and related returns for tax years beginning in 2002, and was divided into three parts. This

report discusses Part I, involving compliance check letters sent to 1,223 organizations, and Part II, a separate

project involving examinations of 782 organizations. Approximately 10% of the examinations remain open. Part III,

which was initiated based on information gathered in Part II, will be discussed subsequently, as will our

continuing work in the executive compensation compliance area.


• Significant reporting issues exist – Over 30% of compliance check recipients amended their Forms 990. Fifteen

percent (15%) of the compliance check recipients were selected for examination.

• Examinations completed to date do not evidence widespread concerns other than reporting. However, as this was not

a statistical sample, no definitive statement can yet be made concerning the compliance level in this area.

Continued work in the area of executive compensation is warranted.

• Where problems were found, significant dollars are being assessed (25 examinations have resulted in proposed

excise tax assessments under Chapter 42, aggregating in excess of $21 million, against 40 disqualified persons or

organization managers.)

• Although high compensation amounts were found in many cases, generally they were substantiated based on

appropriate comparability data.

• Additional education and guidance, as well as training for agents, are needed in the areas of reporting

requirements, and the “rebuttable presumption” procedure that may be relied upon by public charities to establish

appropriate compensation.

• Changes in the Form 990 series are necessary to reduce errors in reporting and provide sufficient information to

enable the IRS to identify compensation issues

• Part I and Part II utilized new compliance contact techniques, which have since been refined in later projects

such as Credit Counseling and Down Payment Assistance.

• Using those refined techniques and concentrating on particular industries, demographics and governance practices

in future efforts should allow us to better assess and understand compliance levels and enable us to identify and

concentrate our efforts on noncompliant taxpayers...

Added 12/25/2009 by tpollak, Modified 04/07/2010 by asblackwood


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