IRS private letter ruling addresses excess benefit transaction rules in employed physician setting

Exempt Organizations Tax Services Update

The IRS recently issued a private letter ruling in which it ruled that a highly compensated physician employed by a tax-exempt healthcare system was not a disqualified person for purposes of the Internal Revenue Code Section 4958 excess benefit transaction rules. The excess benefit transaction rules should be taken into account by tax-exempt organizations in reviewing executive compensation and other financial transactions with officers, directors and other insiders. The detailed analysis in the IRS ruling highlights the facts-and-circumstances nature of these rules. The ruling may not be relied on by other taxpayers but offers an insight into how the IRS may review the application of the excess benefit transaction rules in the context of physicians within a healthcare system.



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