The IRS has announced that it will issue proposed regulations addressing the excise tax on excessive compensation to employees of tax-exempt organizations. The tax generally applies to any applicable tax-exempt organization (ATEO) that pays a covered employee more than $1 million in a tax year or an excess parachute payment. Tax legislation signed into law last year expanded the application of the excise tax by broadening the definition of a covered employee. Previously, it included only the five highest-compensated employees for the tax year. Now, the excise tax may apply to an ATEO for any employee with compensation exceeding $1 million in a tax year or an excess parachute payment.
