Intermediate sanctions are penalties on disqualified persons who participate in or approve excess benefit transactions, and non-profit hospital executives and other stakeholders could be subject to these sanctions if compensation programs are not up to snuff, according to a recent webinar from Venable and Guidestar.
Here are four points on intermediate sanctions that non-profit hospital executives and others should know, ranging from the definition of a "disqualified person" to the types of situations that could cause the sanctions.
1. Disqualified persons. Intermediate sanctions can only be imposed on people within a non-profit organization who are considered to be "disqualified." This includes any person who could have influenced the affairs of the hospital within a five-year period of the "benefit transaction," family members of those individuals, anyone who has a 35 percent controlling interest, certain donors and other people who support a tax-exempt hospital.
2. Positions of substantial influence. Specifically, the Internal Revenue Service lists several specific positions of those who could exert "substantial influence" on the affairs of the hospital. They include president, CEO, CFO, COO, treasurer, voting members of the hospital board, organization founders and some donors.
3. Types of transactions. The most common situation that could result in an "excess benefit transaction" is when a non-profit hospital executive receives unjustified compensation. Other situations include payments for services provided to the organization, purchase or sale of property by the organization to a disqualified person and other certain fringe benefits.
4. Penalties. If a hospital executive or stakeholder is found to have received an excessive benefit, the penalties could be steep. The value of the excessive benefit would have to be returned to the organization, and an excise tax would then be assessed. That excise tax would either be 25 percent of the value if the benefit is returned before the IRS issues a notice of deficiency or 200 percent of the value if the benefit is returned after the IRS issues a notice of deficiency. A 10 percent tax on any organization manager that knowingly approves an "excess benefit transaction" would also be levied, according to the webinar.
Here are four points on intermediate sanctions that non-profit hospital executives and others should know, ranging from the definition of a "disqualified person" to the types of situations that could cause the sanctions.
1. Disqualified persons. Intermediate sanctions can only be imposed on people within a non-profit organization who are considered to be "disqualified." This includes any person who could have influenced the affairs of the hospital within a five-year period of the "benefit transaction," family members of those individuals, anyone who has a 35 percent controlling interest, certain donors and other people who support a tax-exempt hospital.
2. Positions of substantial influence. Specifically, the Internal Revenue Service lists several specific positions of those who could exert "substantial influence" on the affairs of the hospital. They include president, CEO, CFO, COO, treasurer, voting members of the hospital board, organization founders and some donors.
3. Types of transactions. The most common situation that could result in an "excess benefit transaction" is when a non-profit hospital executive receives unjustified compensation. Other situations include payments for services provided to the organization, purchase or sale of property by the organization to a disqualified person and other certain fringe benefits.
4. Penalties. If a hospital executive or stakeholder is found to have received an excessive benefit, the penalties could be steep. The value of the excessive benefit would have to be returned to the organization, and an excise tax would then be assessed. That excise tax would either be 25 percent of the value if the benefit is returned before the IRS issues a notice of deficiency or 200 percent of the value if the benefit is returned after the IRS issues a notice of deficiency. A 10 percent tax on any organization manager that knowingly approves an "excess benefit transaction" would also be levied, according to the webinar.
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