IRS Code Section 4958 and 4941: Intermediate Sanctions

OCG works with tax-exempt organizations to ensure that the non-profit organization’s compensation structures adhere to Internal Revenue Service (IRS) Code regulations concerning intermediate sanctions (section 4958 and section 4941), private inurement, and self-dealing.

Over a million public charities and private foundations are registered as tax-exempts with the Internal Revenue Service, a number roughly equal to the total of for-profit companies earning over $1.0 million a year. As the operational, financial, and regulatory demands on non-profits have increased, they have increasingly had to seek the same executive talent as commercial enterprises and provide them with attractive compensation. In doing so, tax-exempts must contend with tax regulations governing IRS “intermediate sanctions,” “private inurement,” and “self-dealing” and with rewarding their executives appropriately. Neglect may see significant excise taxes levied upon an unfortunate executive, among other things, as well as put at risk the group’s exempt status.

As a compensation firm with both expertise and experience assisting exempt organizations, we work with their legal counsel to help charitable organizations set compensation programs to steer a course to the “safe harbor” provisions of the IRS intermediate sanctions regulations. We also assist counsel with compensation design and considerations of private inurement for public charities and of self-dealing for private foundations.

See our presentation on Intermediate Sanctions.