Tax-exempt Organizations: Executive Compensation

General Rules

      Intermediate Sanctions Rules under--

     Deferred Compensation Rules applicable to457(f) Plans:


  • National Council of Nonprofits - summary of exec comp rules, plus useful pointers, links, and forms (such as comp. policies and evaluations) 
  • Calhoun Website - For comprehensive info about Executive Compensation Rules for Tax-exempt Orgs
  • Section 457(f) Plan Drafting - Checklist:   see https://www.thompsoncoburn.com/insights/publications/item/2019-09-17/a-checklist-for-drafting-section-457(f)-plans-for-tax-exempt-employers
  • Survey Data

See also:Form 990 Reporting for Executive Compensation

New Developments

  • 2018.10.17  Roll-forward Rules for Past Balances.  See this linked page.

  • 2013.Oct.25  AICPA Letter Highlights Open Issues, e.g. Leased CFOs​.  This AICPA letter includes a well-presented table relating to Form 990 drafting issues. It requests IRS insight about a new instruction requiring compensation-related disclosures when an organization uses “management companies such as contract CFO services.” 

  • 2012.April.15  Non-Profit Corporate Governance: The Board's Role presents guidance along the following lines:
    • "Board independence and board attention are of paramount importance in good nonprofit governance.  The independence of the board is key because of the non-distribution constraint – nonprofits exist to serve the public interest, not to benefit owners or other private parties."
    • "Another frequent error of nonprofit boards is inviting new members because of their marquee name" or potential to donate.  "The governing body of a nonprofit must be made up entirely of people in a position to govern it—setting the strategic direction of the organization and overseeing management’s execution of the mission."
    • "Moreover, nonprofits’ economic models may be more complex than for-profits’ models, including ..." 

  • 2011.Apr.29  "Setting, Monitoring Executive Pay Seen As Major Noncompliance Area, IRS Says" -- This article from BNA's Pension & Benefits Daily includes the following quotations:
    • "The biggest area of exempt organization noncompliance related to governance issues is in the area of establishing and overseeing executive compensation, Lois G. Lerner, Internal Revenue Service director of exempt organizations, said April 27."
    • "It is the responsibility of an organization's board of directors to set executive compensation, and that function should not be delegated to a consultant, a specialist, or one individual, Lerner said. A committee of the board can be delegated to do that work, but the full board should be asking many questions when that information is presented." 
    • "Excessive executive pay may result in a penalty being paid by the organization, the executive, and the board members who made the decision to pay a salary that cannot be justified, Lerner said."
    • "Both Lerner and Pacella said information-sharing between the IRS and state attorneys general is ramping up. Over the past four years, Lerner said, the IRS has received 600 referrals from state charity oversight official organizations, and 90 percent of those referrals did lead to examinations. That number is a lot higher than the 20 percent number it used to be, she said."