Expanding Application of Tax on Excess Compensation Within Tax-Exempt Organizations
Section 70416 · Sec. 70416 ·
What this chapter is about
This part widens who counts as a covered employee of a tax exempt group. It now reaches any employee, not just the highest paid few. It also reaches former employees back to 2017. The change starts with tax years after December 31, 2025.
“the term `covered employee' means any employee of an applicable tax-exempt organization (or any predecessor of such an organization) and any former employee of such an organization (or predecessor) who was such an employee during any taxable year beginning after December 31, 2016.”
The section rewrites section 4960(c)(2) of the Internal Revenue Code of 1986 so that a covered employee is any employee of an applicable tax-exempt organization or a predecessor, and any former employee of one who was an employee in a taxable year beginning after December 31, 2016.
What the document actually says
“the term `covered employee' means any employee of an applicable tax-exempt organization (or any predecessor of such an organization) and any former employee of such an organization (or predecessor) who was such an employee during any taxable year beginning after December 31, 2016.”
That sentence, in plain words
The term covers any worker at such a group. It also covers a former worker. That reaches back to tax years after 2016.
What this is about
It includes people who worked at a group the body took over. The tax it feeds falls on very high pay. That tax is not indexed here.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
The document says “shall apply”Who acts: Secretary of the TreasuryHow: statuteSec. 70416 in the PDF
What the document says
“The amendment made by subsection (a) shall apply to taxable years beginning after December 31, 2025.”
The section applies its amendment to taxable years beginning after December 31, 2025.
What the document actually says
“The amendment made by subsection (a) shall apply to taxable years beginning after December 31, 2025.”
That sentence, in plain words
The change starts with tax years that begin after December 31, 2025.
What this is about
Earlier tax years are not touched. The old rule still holds for them. The date is fixed in the law.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
Both things the section does: rewrite the definition of a covered employee, and fix the effective date.
Nothing in the section is left out. It has two subsections and each is recorded.
The section works by amending section 4960(c)(2) of the Internal Revenue Code of 1986, which is not indexed here, so what the excess compensation tax charges cannot be checked against anything on this site.
