Intermediate Sanctions allow the Internal Revenue Service (IRS) to assess excise taxes on excess benefit transactions that occur between a disqualified person and a 501(c)(3) or 501(c)(4) tax-exempt organization, as well as the managers who approve these transactions. A disqualified person is someone who “exercises substantial influence” over the organization, as well as their family members. These excise taxes are not paid by the organization and must be paid by the disqualified person and managers involved in the excess benefit transaction.
How does this apply to a church or ministry? These organizations are classified as a 501(c)(3) entity and therefore must comply with the requirements that affect the tax reporting related to the disqualified persons.
What is an excess benefit transaction? See post #2.
