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Exempt Organizations Bulletin (June 2005)

Favorable Settlement in First
"Intermediate Sanctions" Case
to Reach IRS Appeals




This article concerning the "intermediate sanctions" excise tax applicable to certain exempt organizations is part of the Pillsbury Winthrop Shaw Pittman LLP Tax Page, a World Wide Web demonstration project, no portion of which is intended and cannot be construed as legal or tax advice. Comments are welcome on the design or content of this material.


Attorneys at Pillsbury Winthrop Shaw Pittman LLP recently reached a favorable settlement in the first excess benefit case brought by the Internal Revenue Service under section 4958 of the Code (also known as the "intermediate sanctions") to reach IRS Appeals. The case involved alleged excess compensation, post-employment consulting and medical benefit issues. The IRS proposed adjustments exceeding $3 million. Partners William Bonano and Laura Watts represented the client through the examination process, before the IRS National Office as part of the mandatory technical advice procedure required by the excess benefit provisions, and before EO Appeals.

Both Ms. Watts and Mr. Bonano also frequently counsel nonprofit clients concerning compliance with the section 4958 regulations, including developing contemporaneous documentation to satisfy the regulations' "rebuttable presumption" safe harbor.


This material is not intended to constitute a complete analysis of all tax considerations. Internal Revenue Service regulations generally provide that, for the purpose of avoiding United States federal tax penalties, a taxpayer may rely only on formal written opinions meeting specific regulatory requirements. This material does not meet those requirements. Accordingly, this material was not intended or written to be used, and a taxpayer cannot use it, for the purpose of avoiding United States federal or other tax penalties or of promoting, marketing or recommending to another party any tax-related matters.


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