Exempt Organizations: The New Excise Tax on Excess Compensation

excise tax, healthcare, tax billOn December 22, 2016, the Tax Cuts and Jobs Act (the “Act”) became law. While cutting certain tax rates, the Act also imposed a new tax: There is now an excise tax applicable to exempt organizations on “excess compensation.” This new tax will apply to the following: “(1) so much of the remuneration paid (other than any excess parachute payment) by an applicable tax-exempt organization for the taxable year with respect to employment of any covered employee in excess of $1,000,000, plus (2) any excess parachute payment paid by such an organization to any covered employee.” Pub. L. No. 115-97, § 13602 (to be codified at I.R.C.… Read More

An Ounce of History: The Sixth Circuit Addresses Refund Claims for Excise Taxes

Excise Tax, Worldwide equipment v. US, sixth circuitThe Internal Revenue Code imposes excise taxes on certain types of goods and services. For example, there are retail excise taxes on certain fuels, and on heavy trucks and trailers. I.R.C. §§ 4041, 4051. There are manufacturer’s excise taxes that are imposed on a variety of products, including fishing rods and firearms. I.R.C. §§ 4161(a), 4181. Excise taxes are also imposed upon communications services and on air passenger and air freight services. I.R.C. §§ 4251, 4261, 4271.

These taxes are actually born by the purchaser, and that creates a complication: If the entity collecting the tax seeks a refund, the federal government could also be subject to duplicate claims from the purchasers who actually paid the tax.… Read More

A Switch in Time: The Sixth Circuit Examines the Limitations Period for the Prohibited Allocation Excise Tax, Part II

ESOPOn Tuesday, September 15, I reported on a recent Sixth Circuit opinion Law Office of John H. Eggertsen, P.C. v. Commissioner, No. 14-2591, 2015 U.S. App. LEXIS 15930 (6th Cir. Sept. 8, 2015), which dealt with a substantive issue under Section 4979A of the Internal Revenue Code, as well as the relevant limitations period. The limitations issue is interesting because there were two statutes that might control and because the government flip-flopped on which should apply.

Although there was an express provision in Section 4979A, the Sixth Circuit concluded that the general assessment limitation in Section 6501(a) applied and that the excise tax was assessed on a timely basis, as the taxpayer had failed to file the requisite excise tax return.… Read More