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Intermediate Sanctions

John R. Wylie, Esq/ | posted 11/02/2007
This article provided by the Engstrom Institute

I. Overview

Intermediate sanctions enable the IRS to penalize organizations described in section 501(c)(3) of the Internal Revenue Code ("IRC") for certain abuses without revoking their exempt status. The IRS can assess intermediate sanctions excise taxes when a "disqualified person" is involved in an "excess benefit transaction."  IRC §4958. The primary excise taxes come in two tiers. The first tier is a 25% tax on the excess benefit received by a disqualified person. The second tier is a 200% tax on the excess benefit and can be imposed if the disqualified person fails to return the excess benefit within a specified time period. These excise taxes are assessed against the individual receiving the excess benefit. In addition to taxing the disqualified person, the IRS may also impose a 10% tax (up to $20,000) collectively on the "organization managers" who participated in the excess benefit transaction knowing it to be improper.

The IRS has issued Temporary Regulations governing the ...

See also:

 compensation, intermediate sanctions, IRS, ministry income, taxes