The Internal Revenue Service has issued guidance that implements a change in the 2017 tax overhaul that imposed a 21 percent excise tax on compensation paid to executives at some nonprofit organizations, according to Bloomberg Tax.
Under the 2017 law, there’s a tax on a nonprofit organization’s five highest-paid employees earning at least $1 million. The tax, paid by the organization, has been in effect since 2018, but the new guidance provides details on how to calculate employee wages and other compensation to determine if the tax applies, according to the report.
Under the proposed rule, any deferred compensation or retirement bonus not vested before the first taxable year beginning after Dec. 31, 2017, is subject to the tax, according to the American Hospital Association.
The AHA urged Congress to provide an exception for existing contracts or nonqualified deferred compensation plans for tax-exempt healthcare organizations.
Access the full Bloomberg Tax article here.