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Is Split-Dollar the Answer for College Coaches Looking to Sack the IRC 4960 Excise Tax?: What Advisors Need to Know about the New Penalty Tax to Better Counsel Clients



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The Tax Cuts and Jobs Act added IRC § 4960 which imposes an excise tax on tax-exempt organizations equal to the corporate tax rate (21%) on compensation over $1 million paid to its five highest-paid employees.  College coaches and athletic directors are often the highest paid employees on campus, as was highlighted in 2016 with Jim Harbaugh’s $5 million contract extension with the University of Michigan.  

Harbaugh and the University entered into a loan-regime split-dollar agreement, requiring the University to loan millions of dollars for the payment of Harbaugh’s life insurance premiums.  It seems that split-dollar loans would avoid the new § 4960 excise tax, so these arrangements could become more prevalent with highly compensated college coaches and their employers. 

While the University of Michigan and Jim Harbaugh may have had a crystal ball when structuring their split-dollar agreement a few years ago, tax-exempts that could be subject to the new excise tax will have to get creative in how they compensate their top employees. In their exclusive LISI webinar, Michael Geeraerts and Jim Magner will review how the excise tax works and will examine a number of creative planning strategies that may lessen its impact. 

Topics they will cover include:

·      Which tax-exempt organizations have potential exposure;

·      Important definitional tests such as “covered employees” “remuneration” the “related party” rule and “parachute payments;”

·      A survey of compensation paid to coaches and athletic directors;

·      A review of the disclosure requirements on Form 990 and the Schedule J;

·      How split dollar arrangements and third-party compensation can avoid the excise tax;

·      Q&A



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Michael Geeraerts, CPA, JD, CGMA®, CLU® is an advanced planning consultant at The Guardian Life Insurance Company of America®. Prior to joining Guardian, Michael was a manager at PricewaterhouseCoopers LLP and a tax consultant at KPMG LLP. Michael’s experiences range from preparing tax returns for middle market companies, auditing billion-dollar mutual funds’ financial statements, to researching unique tax savings strategies for various companies.  Michael has written articles for numerous national publications and has delivered continuing education courses to CPAs and attorneys on a variety of estate, business and income tax planning strategies.



Jim Magner is an advanced planning attorney at The Guardian Life Insurance Company of America®.  Prior to joining Guardian, Jim was General Counsel for a national broker dealer/brokerage general agency.  Jim previously worked as an Attorney-Advisor in the IRS’s Office of Chief Counsel, in Washington, DC.  While with the Office of Chief Counsel, Jim wrote private and public rulings on estate, gift, GST and charitable remainder trust issues. 


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