Excise Tax on Excess Benefit Transactions.
Section 4958 of the Internal Revenue Code imposes an excise tax on excess benefit transactions between a disqualified person and an applicable tax-exempt organization. The disqualified person who benefits from an excess benefit transaction is liable for the excise tax. An organization manager may also be liable for an excise tax on the excess benefit transaction.
These taxes are reported on Form 4720, Return of Certain Excise Taxes on Charities and Other Persons Under Chapters 41 and 42 of the Internal Revenue Code.
Interaction Between Section 4958 Taxes and Revocation of Exemption
Section 4958 does not affect the substantive standards for tax exemption under section 501(c)(3) or 501(c)(4). In appropriate cases, the IRS may also propose revocation of tax-exempt status, whether or not section 4958 excise taxes are imposed.
More information. For more information, see the instructions to Forms 990 and 4720. Also see the following articles:
- "Automatic” Excess Benefits Transactions Under IRC 4958, an Exempt Organizations Continuing Professional Education article for Fiscal Year 2004
- Intermediate Sanctions (IRC 4958) Update, an Exempt Organizations Continuing Professional Education article for Fiscal 2002