IRS Releases 2018 Draft of Excise Tax Form 4720; Includes Schedules for Exempt Organizations

Two new excise taxes added by the recently enacted Tax Cuts and Jobs Act may apply to exempt organizations, for tax years beginning after December 31, 2017:

  1. A 21% excise tax on executive compensation, applicable to the top five "covered" employees who are paid more than $1 million. The excess amount greater than $1 million is the taxable portion. A covered employee is a current or former employee who is or was one of the five highest-compensated in a tax-exempt organization for the taxable year, or was a covered employee of the organization (or its predecessor) for any preceding taxable year beginning after December 31, 2016. The tax does not include compensation paid to licensed medical professionals (doctors and nurses) and veterinarians.
     
  2. A 1.4% excise tax on the net investment income of private colleges and universities that meet all the following criteria:
  • The institution had at least 500 students in the preceding taxable year;
  • More than 50% of the students are located in the United States;
  • The institution is not a state college or university; and
  • The aggregate fair market value of the assets at the end of the preceding taxable year (other than those used in carrying out the institution's exempt purpose) is at least $500,000 per student.

Form 4720 will be used to report both excise taxes; Schedule N for the tax on executive compensation, Schedule O for the tax on net investment income.

Note that Form 4720 is a separate return from the Form 990, but carries the same due date. A separate extension would need to be completed for Form 4720, however; use Form 8868, Application for Automatic Extension of Time to File an Exempt Organization Return, and enter code 09, Form 4720 (other than individual).

The IRS released the 2018 draft of Form 4720 on July 18. To stay current with the latest draft forms or the release of final forms, visit the IRS website.

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at contactSD@schneiderdowns.com.

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2019 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

our thoughts on

The 2019 Form 1040 Facelift
The IRS turns its focus to cryptocurrency
The IRS turns its focus to cryptocurrency
Kress Case Addresses S Corporation vs. C Corporation Issues
Not-for-Profit, Tax BY Preet Mann
Mandatory E-Filing of Nonprofit Tax Returns
Tax Credits for Plug-In Electric Drive Vehicles

Register to receive our weekly newsletter with our most recent columns and insights.

Have a question? Ask us!

We’d love to hear from you. Drop us a note, and we’ll respond to you as quickly as possible.

Ask us

contact us

Map of Pittsburgh Office
Pittsburgh

One PPG Place, Suite 1700
Pittsburgh, PA 15222

contactsd@schneiderdowns.com
p:412.261.3644     f:412.261.4876

Map of Columbus Office
Columbus

65 East State Street, Suite 2000
Columbus, OH 43215

contactsd@schneiderdowns.com
p:614.621.4060     f:614.621.4062

Map of Washington Office
Washington, D.C.

1660 International Drive, Suite 600
McLean, VA 22102