Jump directly to the Content

Charity Founder’s Wife Heavily Penalized for Excess Benefit

Tax Court upholds more than in penalties and taxes for unreported compensation left uncorrected.

The United States Tax Court ruled that the wife of the founder of a medical missions charity had received an excess benefit from the charity subjecting her to a “first-tier” penalty of 25 percent of the amount of the excess benefit, and an additional “second-tier” tax of 200 percent of the excess since it had not been returned to the charity.

Note. It is important for church leaders to be familiar with this case since excess benefit transactions are common among churches and expose ministers and possibly others to significant penalties under section 4958 of the tax code. These penalties are assessed against the minister, not the church.

Background

In 2000, a medical missions charity (the “charity”) applied to the Internal Revenue Service (IRS) for recognition of tax-exempt status. In its application, it described its exempt purpose as the operation of a clinic ...

Join now to access this member-only content

Become a Member

Already a member? for full access.

Related Topics:
Posted:
  • November 19, 2021

Related ResourcesVisit Store

Church Compensation - Second Edition
Church Compensation - Second Edition
From Strategic Plan to Compliance
ChurchSalary
ChurchSalary
There’s a better way to calculate salaries. Create compensation reports with ChurchSalary’s interactive calculator tool.
Smart Money for Church Salaries
Smart Money for Church Salaries
This resource takes you on a journey through real-life case studies to uncover compensation issues and navigate their solutions.
CARES Act and CAA Table
CARES Act and CAA Table
A Side-By-Side Look at COVID-19 Economic Relief