In recent years public companies became subject to rules requiring a heightened level of disclosure on executive compensation and related-party transactions. The tax-exempt sector, on the other hand, has had extensive experience with similar reporting requirements for many years, and the disclosure requirements are still evolving. Compliance in this area became important for certain tax-exempt organizations in the mid-1990s when intermediate sanctions were introduced to impose penalty taxes on key employees who receive unreasonable compensation and managers who knowingly approve it.

This article discusses the intermediate sanctions framework in relation to tax-exempt organizations, disclosure requirements for compensation and related-party transactions, and best practices on processes and procedures for compensation, expense reporting and related-party transactions.

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