Close
Close

Final rules confirm Form 4720 to be used to pay certain excise taxes

RFP
Tax Hot Topics newsletterThe IRS issued final regulations (T.D. 9855) regarding excise tax reporting requirements for non-profit entities, including reporting requirements for Section 4960 excise taxes on excess executive remuneration.

Section 4960, which was newly enacted as part of the Tax Cuts and Jobs Act (TCJA), imposes a 21% excise tax on tax-exempt organizations that pay their highest-paid employees (covered employees) remuneration in excess of $1 million or parachute payments (compensation contingent on separation from employment) equal to at least three times a covered employee’s average pay. The new taxes are effective for taxable years of tax-exempt organizations beginning after Dec. 31, 2017.

The final regulations, which are effective as of April 9, adopt the proposed regulations issued in November without change. The rules provide that taxpayers (including governmental entities) liable for excise taxes under Sections 4960, 4966 (taxes on taxable distributions under donor advised funds), 4967 (taxes on prohibited benefits under donor advised funds) and 4968 (taxes on investment income of private colleges and universities) must file an annual return on Form 4720 to accompany payment of the excise taxes. Form 4720 must be filed on or before the 15th day of the fifth month following the end of the taxpayer’s taxable year during which the excise tax liability was incurred. Thus, the 2018 Form 4720 for an organization with a calendar taxable year is due no later than May 15, 2019.

The final regulations also clarify that the excise taxes under Sections 4966 and 4967 are qualified first-tier taxes subject to abatement under Section 4962.

Contacts:
Jeff Martin
Partner, Washington National Tax Office
T +1 202 521 1526

Keith Mong
Managing Director, Washington National Tax Office
T +1 202 521 1554

James Sanchez
Senior Associate, Washington National Tax Office
T +1 202 861 4107

Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.