The document outlines the final regulations under section 4960 of the Internal Revenue Code, which impose a tax on tax-exempt organizations that pay over $1,000,000 in compensation to certain executives, or "excess parachute payments," to covered employees. These regulations give guidelines on how to calculate and allocate the tax, define terms like “applicable tax-exempt organization” and “covered employee,” and provide exceptions to specific employee definitions to avoid discouraging beneficial services. They also clarify rules for determining when compensation is paid and for coordinating these rules with existing laws, aiming to ensure fair application and prevent tax avoidance while providing necessary flexibility for tax-exempt organizations.
Simple Explanation
In this document, the government says that if a nonprofit organization pays some of their top workers more than $1 million, they have to pay a special tax, and there are rules to make sure these organizations don't try to sneak around paying this tax.