ARLINGTON, Va.—NAFCU is providing additional insights when it comes to reporting the 21% excise tax on excess executive compensation implemented under the Tax Cuts and Jobs Act (TCJA).
On Dec. 31, 2018, the Treasury Department and IRS issued interim guidance on how to report the excise tax. NAFCU explains that credit unions fall under the definition of an applicable tax-exempt organization (ATEO). The provision applies to ATEOs and related organizations and requires them to pay an excise tax on excess remuneration and excess parachute payments made to covered employees.
"While we are providing a high-level overview of the requirements explained in the interim guidance, your credit union may wish to consult with benefits or tax counsel for a more detailed analysis about your credit union or CUSO's specific obligations under section 4960," NAFCU said. "This guidance is interim guidance, and it appears that there are still issues that need to be addressed to take into account the credit union business model, and NAFCU will be advocating for changes in the IRS regulations on this issue."
‘Disparity’ Exists
The TCJA contained a provision allowing for-profits to grandfather in binding contracts in effect before enactment, but did not include the same clause for not-for-profit tax-exempt organizations. NAFCU urged the House to address this “disparity” in its year-end tax bill passed in December. NAFCU noted that it has repeatedly reached out to and met with members of Congress to seek relief for credit unions from this new tax imposed on certain not-for-profits.
A NAFCU Compliance Blog post also explains the guidance, and NAFCU said it continues to advocate for parity between for-profit and not-for-profit corporations under this tax provision.