In the wake of Richard Grasso's obscene money grab from the tax exempt New York Stock Exchange, Steve Miller, the newly appointed head of the IRS Commission For Tax Exempt Organizations recently announced a new IRS initiative tentatively entitled "Compensation Enforcement Project" to review the level and methodology of executive compensation for tax exempt originations. There are approximately 1.8 million tax exempt organizations in the United States and the levels of compensation in the health and hospital sector is likely to be a prime target.
The initiate will be supported by an IRS Compliance Unit located in Ogden, Utah which will be staffed by 20 revenue agents and tax examiners. The IRS will start with a round of 1000 letters to tax exempt organizations seeking information concerning their executive compensation procedures and experience.
The IRS will also be looking for evidence of "excess benefit transactions." If a tax exempt organization holds a meeting of its trustees at the Broadmoor Hotel in Colorado Springs and wives are invited on the organization's tab, that is an "automatic excess benefit transaction" if it is not reported as compensation. Penalties, interest and restitution can rise to 225% of the amount involved.
Tax exempt organizations will be wise to review their unreported perks to executives, trustees and employees to assure reporting compliance and to document the process undertaken to assure that executive and employed physicians compensation complies with fair market value requirements.
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