Tax Planning and Compliance for Tax-Exempt Organizations, 6th Edition

CHAPTER 20Private Inurement and Intermediate Sanctions

• § 20.2 Salaries and Other Compensation
• § 20.10 Intermediate Sanctions
  • (d) Excess Benefit Transaction
  • (j) New § 4960 Excise Tax
• § 20.11 New § 4960 Excise Tax on Excess Compensation

§ 20.2 Salaries and Other Compensation

p. 650. Insert new paragraph regarding compensation issues after bullets at top of page:

An issue that arose after the publication of the sixth edition was the impact of COVID-19 disease. Questions regarding the tax consequence of new salary policies regarding illness-related programs are now being answered. Unanswered questions involved whether costs associated with COVID-19, such as the cost of testing, extra paid leave, extended vacation time, or other compensation paid to an employee unable to work due to contracting the disease, could be treated as compensation. Also unclear was whether such expenses paid by the employer were tax-deductible and taxable to the employee.

The initial guidance came from a program called Qualified Small Employer Health Reimbursement Arrangement, referred to as a QSEHRAs. The 21st Century Cures Act (“Cures Act”), enacted on Dec. 13, 2016, amended Section 9831 of the Internal Revenue Code (“Code”) to permit small employers of fewer than 50 employees to adopt stand-alone health reimbursement arrangements (“HRAs”) for their employees without incurring excise taxes under the Affordable Care Act (“ACA”). These HRAs are referred to as “qualified small employer health reimbursement ...