Executive Compensation Remains IRS Focus

The IRS Director of Exempt Organizations, Lois Lerner, recently conveyed that the IRS will be looking into the results of its May compensation survey for executives of colleges and universities.  More than one-half of the colleges and universities surveyed reported that they followed the procedures set forth in Treasury Regulation 53.4958-6 to establish a rebuttable presumption that executive compensation is reasonable (such procedures are discussed in a prior blog entry).  The IRS will now be digging further to determine whether the colleges and universities precisely satisfied these procedures, with a particular focus on whether peer compensation is truly comparable and the decision was properly documented.   It is my belief the IRS will continue to focus on executive compensation and will not limit its inquiries to colleges and universities.  Therefore, it is strongly recommended that your charity precisely follow the procedures set forth in the Regulations now to protect the compensation from scrutiny.

Written by in: Governance

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