Excise Tax Deadline Looming for Credit Unions
Included in the Tax Cuts and Jobs Act is an excise tax provision that affects all applicable tax-exempt organizations. The specific regulation is located in Section 4960 of the Internal Revenue Code (IRC). The tax rate is currently set at 21 percent on compensation that is in excess of $1 million.
On December 31, 2018, the IRS issued Notice 2019-9, which provides interim guidance on applying IRC Section 4960, as well as the related filing of IRS Form 4720, Return of Certain Excise Taxes.
While federally chartered credit unions are exempt from filing IRS Form 990, they are not exempt from the excise tax reporting requirements. Form 4720 and the related excise tax payments are due May 15, 2019 for the December 31, 2018 year end.
While most credit unions will not have any employees that meet the $1 million compensation requirement, situations, such as when deferred compensation vests, could bring compensation to a point where a credit union is subject to excise tax.
Credit Unions should assess their processes in place to verify they are complying with the excise tax reporting requirements annually.
Dean has more than 25 years of experience providing audit, internal audit, and consulting services to financial services companies. He has provided consulting services in the areas of business lending, product costing and profitability, and asset/liability management. Dean has worked with a number of financial services companies on strategic issues such as board governance and enterprise risk management, as well as the role of internal audit and risk management, regulatory issues, and many accounting related topics.
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