Law Commons^™

Intermediate Sanctions: Controlling The Tax-Exempt Organization Manager, Alex Ritchie

Faculty Scholarship

On August 4, 1988, the Department of the Treasury issued proposed intermediate sanctions regulations that allow the Internal Revenue Service to impose significant excise taxes on executives of tax-exempt organizations who receive compensation in excess of reasonable compensation or in excess of amounts that would ordinarily be paid for like services by like enterprises. Exempt organization theory holds that government provides a tax exemption to further social goals, but those goals are frustrated when management has conflicting incentives. In a for-profit entity, management and firm owners have conflicting goals when control is separated from ownership, but in a tax-exempt entity, …