Title 26
SECTION 53.4960-0
53.4960-0 Table of contents.
§ 53.4960-0 Table of contents. § 53.4960-1 Scope and definitions.(a) Scope.
(b) Applicable tax-exempt organization.
(1) In general.
(i) Section 501(a) organization.
(ii) Section 521 farmers' cooperative.
(iii) Section 115(1) organization.
(iv) Section 527 political organization.
(2) Certain foreign organizations.
(3) Organization described in section 501(c)(1)(A)(i) for which the enabling act provides for exemption from all current and future Federal taxes.
(c) Applicable year.
(1) In general.
(2) Examples.
(3) Short applicable years.
(i) In general.
(ii) Initial year of ATEO status.
(iii) Year of termination of ATEO status.
(A) Termination on or before the close of the calendar year ending with or within the taxable year of termination.
(B) Termination after the close of the calendar year ending in the taxable year of termination.
(4) Examples.
(d) Covered employee.
(1) In general.
(2) Five highest-compensated employees.
(i) In general.
(ii) Limited hours exception.
(A) In general.
(1) Remuneration requirement.
(2) Hours of service requirement.
(B) Certain payments disregarded.
(C) Safe harbor.
(iii) Nonexempt funds exception.
(A) In general.
(1) Remuneration requirement.
(2) Hours of service requirement.
(3) Related organizations requirement.
(B) Certain payments disregarded.
(iv) Limited services exception.
(A) Remuneration requirement.
(B) Related ATEO requirement.
(1) Ten percent remuneration condition.
(2) Less remuneration condition.
(3) Examples.
(e) Employee.
(1) In general.
(2) Directors.
(3) Trustees.
(f) Employer.
(1) In general.
(2) Disregarded entities.
(g) Medical services.
(1) Medical and veterinary services.
(i) In general.
(ii) Examples.
(2) Definition of licensed medical professional.
(h) Predecessor.
(1) Asset acquisitions.
(2) Corporate reorganizations.
(3) Predecessor change of form or of place of organization.
(4) ATEO that becomes a non-ATEO.
(i) General rule.
(ii) Intervening changes or entities.
(5) Predecessor of a predecessor.
(6) Elections under sections 336(e) and 338.
(7) Date of transaction.
(i) Related organization.
(1) In general.
(i) Controls or controlled by test.
(ii) Controlled by same persons test.
(iii) Supported organization test.
(iv) Supporting organization test.
(v) VEBA test.
(2) Control.
(i) In general.
(ii) Stock corporation.
(iii) Partnership.
(iv) Trust.
(v) Nonstock organization.
(A) In general.
(B) Control of a trustee or director of a nonstock organization.
(C) Representatives.
(vi) Brother-sister related organizations.
(vii) Section 318 principles.
(A) In general.
(B) Nonstock organizations.
(1) Attribution of ownership interest from a nonstock organization to a controlling person.
(2) Attribution of ownership interest from a controlling person to a nonstock organization.
(3) Indirect control of a nonstock organization through another nonstock organization.
(4) Attribution of control of nonstock organization to family member.
(3) Examples.
§ 53.4960-2 Determination of remuneration paid for a taxable year.(a) Remuneration.
(1) In general.
(2) Exclusion of remuneration for medical services.
(i) In general.
(ii) Allocation of remuneration for medical services and non-medical services.
(iii) Examples.
(b) Source of payment.
(1) Remuneration paid by third parties for employment by an employer.
(2) Remuneration paid by a related organization for employment by the related organization.
(c) Applicable year in which remuneration is treated as paid.
(1) In general.
(2) Vested remuneration.
(3) Change in related status during the year.
(d) Amount of remuneration treated as paid.
(1) In general.
(2) Earnings and losses on previously paid remuneration.
(i) In general.
(ii) Previously paid remuneration.
(A) New covered employee.
(B) Existing covered employee.
(iii) Earnings.
(iv) Losses.
(v) Net earnings.
(vi) Net losses.
(3) Remuneration paid for a taxable year before the employee becomes a covered employee.
(i) In general.
(ii) Examples.
(e) Calculation of present value.
(1) In general.
(2) Treatment of future payment amount as present value for certain amounts.
(f) Examples.
§ 53.4960-3 Determination of whether there is a parachute payment.(a) Parachute payment.
(1) In general.
(2) Exclusions.
(i) Certain qualified plans.
(ii) Certain annuity contracts.
(iii) Compensation for medical services.
(iv) Payments to non-HCEs.
(3) Determination of HCEs for purposes of the exclusion from parachute payments.
(b) Payment in the nature of compensation.
(1) In general.
(2) Consideration paid by covered employee.
(c) When payment is considered to be made.
(1) In general.
(2) Transfers of section 83 property.
(3) Stock options.
(d) Payment contingent on an employee's separation from employment.
(1) In general.
(2) Employment agreements.
(i) In general.
(ii) Example.
(3) Noncompetition agreements.
(4) Payment of amounts previously included in income or excess remuneration.
(5) Window programs.
(6) Anti-abuse provision.
(e) Involuntary separation from employment.
(1) In general.
(2) Separation from employment for good reason.
(i) In general.
(ii) Material negative change required.
(iii) Deemed material negative change.
(A) Material diminution of compensation.
(B) Material diminution of responsibility.
(C) Material diminution of authority of a supervisor.
(D) Material diminution of a location.
(E) Material change of location.
(F) Other material breach.
(3) Separation from employment.
(f) Accelerated payment or accelerated vesting resulting from an involuntary separation from employment.
(1) In general.
(2) Nonvested payments subject to a non-service vesting condition.
(3) Vested payments.
(4) Nonvested payments subject to a service vesting condition.
(i) In general.
(A) Vesting trigger.
(B) Vesting condition.
(C) Services condition.
(ii) Value of the lapse of the obligation to continue to perform services.
(iii) Accelerated vesting of equity compensation.
(5) Application to benefits under a nonqualified deferred compensation plan.
(6) Present value.
(7) Examples.
(g) Three-times-base-amount test for parachute payments.
(1) In general.
(2) Examples.
(h) Calculating present value.
(1) In general.
(2) Deferred payments.
(3) Health care.
(i) Discount rate.
(j) Present value of a payment to be made in the future that is contingent on an uncertain future event or condition.
(1) Treatment based on the estimated probability of payment.
(2) Correction of incorrect estimates.
(3) Initial option value estimate.
(4) Examples.
(k) Base amount.
(1) In general.
(2) Short or incomplete taxable years.
(3) Excludable fringe benefits.
(4) Section 83(b) income.
(l) Base period.
(1) In general.
(2) Determination of base amount if employee separates from employment in the year hired.
(3) Examples.
§ 53.4960-4 Liability for tax on excess remuneration and excess parachute payments.(a) Liability, reporting, and payment of excise taxes.
(1) Liability.
(2) Reporting and payment.
(3) Arrangements between an ATEO and a related organization.
(4) Certain foreign related organizations.
(5) [Reserved]
(b) Amounts subject to tax.
(1) Excess remuneration.
(i) In general.
(ii) Exclusion for excess parachute payments.
(2) Excess parachute payment.
(c) Calculation of liability for tax on excess remuneration.
(1) In general.
(2) Calculation if liability is allocated from more than one ATEO with respect to an individual.
(3) Calculation if liability is allocated from an ATEO with a short applicable year.
(4) Examples.
(d) Calculation of liability for excess parachute payments.
(1) In general.
(2) Computation of excess parachute payments.
(3) Reallocation when the payment is disproportionate to base amount.
(4) Election to prepay tax.
(5) Liability after a redetermination of total parachute payments.
(6) Examples.
§ 53.4960-5 [Reserved] § 53.4960-6 Applicability date.(a) General applicability date.
(b) [Reserved]
[T.D. 9938, 86 FR 6219, Jan. 19, 2021]