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Preventing, Correcting and Reporting Excess Benefit Transactions

 

Gain a better understanding of how to prevent, correct and report excess benefits transactions to reduce penalties, including Form 990 reporting requirements and how to avoid liability.

Public charities and social welfare organizations are subject to federal tax laws that prohibit the organization from engaging in excess benefit transactions with insiders to the organization. Excess benefit transactions can put an organization's tax-exempt status at risk and result in significant excise taxes for the person who received the excess benefit and potentially the organization's managers who approved the transaction. Improper transactions must be corrected and reported to the IRS. Financial transactions subject to these rules include employee compensation, independent contractor payments, severance pay, revenue-sharing, transfers of property, payment of insurance premiums, and other perks for insiders or their families, among other transactions. Counsel must prepare public charities and social welfare organizations to scrutinize their executive compensation and other financial transactions with officers, directors, and other insiders to ensure compliance with federal tax law. This topic will provide an overview of the excess benefit transaction rules, related Form 990 reporting requirements, and strategies to avoid liability for excise taxes and revocation of tax-exempt status based on excess benefit transactions.

Agenda

Faculty

David A. Levitt

David A. Levitt

Adler & Colvin

  • Principal with the San Francisco law firm of Adler & Colvin, a firm that specializes in the representation of nonprofit organizations and their donors
  • Focus includes the representation of nonprofit and tax-exempt organizations, with an emphasis on mission-related investments, social enterprise, political advocacy, and nonprofit corporate governance
  • Served as Co-Chair of the Subcommittee on Intermediate Sanctions of the Exempt Organizations Committee from 2006 to 2013
  • Currently the Chair of the Current Developments Subcommittee of the Nonprofit Organizations Committee of the American Bar Association Business Law Section
  • Co-wrote the Rules of the Road; A Guide to the Law of Charities in the United States, Second Edition, Council on Foundations, 2008; other publications include: “Excess Benefit Transactions Under Section 4958 and Revocation of Tax-Exempt Status”, The Practical Tax Lawyer, Spring 2009; “Taking Care of Business: Use of a For-Profit Subsidiary by a Nonprofit Organization”, Business Law Today, June 2014 (co-author); and “Investing In The Future: Mission-Related And Program-Related Investments For Private Foundations”, The Practical Tax Lawyer, Spring 2011
  • Speaks regularly on nonprofit and tax exemption legal matters; also has served as an adjunct professor at the University of San Francisco, teaching a nonprofit legal issues course in the College of Professional Studies
Emily Chan

Emily Chan

Adler & Colvin

  • Attorney with the San Francisco law firm of Adler & Colvin, a firm that specializes in the representation of nonprofit organizations and their donors
  • Advises nonprofit and tax-exempt organizations on matters involving corporate governance and state and federal tax laws
  • Has presented at national conferences, including the American Bar Association Midyear Meeting and Board Source Leadership Forum, and for local groups, such as the Nonprofit Organizations Committee of the Business Law Section of the State Bar of California, the Bar Association of San Francisco, and Foundation Center - San Francisco
  • Guest lectured for the Master of Nonprofit Administration degree program at the University of San Francisco
  • Written and co-written articles on nonprofit and exempt organization legal issues for publications such as the American Bar Association Business Law Today, the Nonprofit Quarterly, and the Chronicle of Philanthropy, among others
  • The 2012 recipient of the Outstanding Young Attorney award from the Nonprofit Organizations Committee of the Business Law Section of the American Bar Association for her contributions to the nonprofit sector and development of nonprofit law

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