Tax on Excessive Compensation
Section 4960 of the Internal Revenue Code, enacted in the Tax Cuts and Jobs Act (TCJA), imposes an excise tax equal to 21 percent of the sum of the compensation exceeding $1 million for the taxable year with respect to any covered employee and any excess parachute payment paid by the organization to any covered employee.
Excise Tax on Net Investment Income
Certain private colleges and universities will use Form 4720 to calculate the 1.4 percent excise tax on their net investment income, enacted as part of the Tax Cut and Jobs Act (TCJA).
An institution is subject to the excise tax if it meets the following threshold tests:
- The institution has at least 500 tuition-paying students, based upon a daily average student count, during the preceding tax year;
- More than 50 percent of those students must have been located in the United States; and (3) At the end of the preceding tax year, the aggregate fair market value of the assets that are not used directly in carrying out the institution’s exempt purpose and are held by the institution and related organizations must be at least $500,000 per student.
For more information, visit the IRS website.