Kutchins, Robbins & Diamond, Ltd. Certified Public Accountants and Advisors

Exempt Organization Status and Excess Benefit Transactions

The IRS has issued final regulations concerning the exempt status of organizations that are tax-exempt under Code Sec. 501(c)(3) but engage in excess benefit transactions. As an exempt organization, this development may affect you.

The final regulations clarify the substantive requirements for tax exemption under Code Sec. 501(c)(3) and the relationship between these requirements and the imposition of Code Sec. 4958 excise taxes on excess benefit transactions. The final regulations add an example that addresses the issue of reasonable compensation and illustrates the application of the revocation factors to an excess benefit transaction that is neither significant nor de minimis in comparison to the size and scope of the organization’s exempt activities.

Excess benefit transactions can occur with all transactions an exempt organization may engage in, including purchases and sales of goods and other property, leases, compensation paid to executives, employees and directors, grants paid, payment of expenses of private individuals, and so on. The regulations are lengthy and complex, and the consequences for violation of them are severe.

We would be happy to help you evaluate particular transactions, including compensation arrangements, past or planned, and determine whether you are at risk of operating in contravention of these rules. Should you be at risk, we can help you implement the appropriate safeguards. Contact us today to learn more. 


Newsletter signup

Receive our informative Newsletters with valuable tax, financial and business
operations information.



Read the latest news
from KRD and find out more.

KRD Ranked by Forbes as one of America’s Top Recommended Tax Firms for 2021
Keep Up With Payables: Paying Bills in QuickBooks
How Do You Add Users in QuickBooks Online?

Request a callback

Would you like to speak to one of our financial advisors over the phone? Just submit your details and we’ll be in touch shortly. You can also email us if you prefer.

    I would like to discuss:


    1051 Perimeter Drive, 9th Floor
    Schaumburg, IL 60173

    Office: 847-240-1040
    Fax: 847-240-1055


    35 E. Wacker Dr., Suite 690
    Chicago, IL 60601

    Office: 312-201-6450
    Fax: 312-201-1286