Sec. 3803. Excise tax on excess tax-exempt organization executive compensation

692 words·~3 min read·/bill/113/hr/1/ih/section-3803

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Subchapter D of chapter 42 is amended by adding at the end the following new section: There is hereby imposed a tax equal to 25 percent of the sum of— so much of the remuneration paid (other than any excess parachute payment) by an applicable tax-exempt organization for the taxable year with respect to employment of any covered employee in excess of $1,000,000, plus any excess parachute payment paid by such an organization to any covered employee. The employer shall be liable for the tax imposed under subsection (a).

For purposes of this section— The term applicable tax-exempt organization means any organization that for the taxable year— is exempt from taxation under section 501(a), is a farmers’ cooperative organization described in section 521(b)(1), or has income excluded from taxation under section 115(1). For purposes of this section, the term covered employee means any employee (including any former employee) of an applicable tax-exempt organization if the employee— is one of the 5 highest compensated employees of the organization for the taxable year, or was a covered employee of the organization (or any predecessor) for any preceding taxable year beginning after December 31, 2013.

For purposes of this section, the term remuneration means wages (as defined in section 3401(a)), except that such term shall not include any designated Roth contribution (as defined in section 402A(c)). Remuneration of a covered employee by an applicable tax-exempt organization shall include any remuneration paid with respect to employment of such employee by any related person or governmental entity. A person or governmental entity shall be treated as related to an applicable tax-exempt organization if such person or governmental entity— controls, or is controlled by, the organization, is controlled by one or more persons that control the organization, is a supported organization (as defined in section 509(f)(2)) during the taxable year with respect to the organization, is a supporting organization described in section 509(a)(3) during the taxable year with respect to the organization, or in the case of an organization that is a voluntary employees’ beneficiary association described in section 501(a)(9), establishes, maintains, or makes contributions to such voluntary employees’ beneficiary association.

In any case in which remuneration from more than one employer is taken into account under this paragraph in determining the tax imposed by subsection (a), each such employer shall be liable for such tax in an amount which bears the same ratio to the total tax determined under subsection

(a)with respect to such remuneration as— the amount of remuneration paid by such employer with respect to such employee, bears to the amount of remuneration paid by all such employers to such employee. For purposes determining the tax imposed by subsection (a)(2)— The term excess parachute payment means an amount equal to the excess of any parachute payment over the portion of the base amount allocated to such payment. The term parachute payment means any payment in the nature of compensation to (or for the benefit of) a covered employee if— such payment is contingent on such employee’s separation from employment with the employer, and the aggregate present value of the payments in the nature of compensation to (or for the benefit of) such individual which are contingent on such separation equals or exceeds an amount equal to 3 times the base amount. Such term does not include any payment described in section 280G(b)(6) (relating to exemption for payments under qualified plans) or any payment made under or to an annuity contract described in section 403(b) or a plan described in section 457(b). Rules similar to the rules of 280G(b)(3) shall apply for purposes of determining the base amount. Rules similar to the rules of paragraphs

(3)and

(4)of section 280G(d) shall apply. Remuneration the deduction for which is not allowed by reason of section 162(m) shall not be taken into account for purposes of this section. . The table of sections for subchapter D of chapter 42 is amended by adding at the end the following new item: Sec. 4960. Tax on excess exempt organization executive compensation. . The amendments made by this section shall apply to taxable years beginning after December 31, 2014.