The IRS issued Notice 2019-09, which provides interim guidance in a fairly lengthy Q&A format relating to Code Section 4960, enacted on December 22, 2017. Code Section 4960 imposes a 21 percent excise tax on the amount of compensation in excess of $1 million and any excess parachute payment paid by an applicable tax-exempt organization to a covered employee. The interim guidance is intended to assist taxpayers in applying Code Section 4960 while the Treasury Department and the IRS develop further guidance on the application of Code Section 4960. In other words, there is more guidance to come in the form of proposed regulations.
The Notice provides that any future guidance will be prospective and will not apply to taxable years beginning before the issuance of that future guidance. Until then, the Notice provides that positions reflected in the Notice will constitute a good faith, reasonable interpretation of the statute upon which tax exempt organizations can rely to comply with the requirements of Code Section 4960 as of December 22, 2017. If a tax exempt organization takes a position outside the safe harbor of the interim guidance, then a reasonable interpretation of the statute generally will be determined based upon all of the relevant facts and circumstances, including whether the organization has applied the position consistently and the extent to which the organization has resolved interpretive issues based on consistent principles and in a consistent manner.
Public comments are requested to be submitted no later than April 2, 2019.