Executive Compensation Study

Determining executive compensation at a nonprofit organization is challenging. You need to attract and retain talented leadership, but nonprofit executive compensation is under increased scrutiny from the public and the IRS.

In fact, by tax law, compensation paid to senior executives of nonprofit organizations should not exceed a “reasonable” amount. Executive compensation that is deemed unreasonably high can result in substantial penalties for the executive. Penalties can also apply to board members and executives who knowingly approve unreasonably high compensation.

If the IRS challenges compensation after it has been paid, you can establish reasonableness by providing comparable data from similarly situated organizations. The tax law, however, includes a provision that encourages advance determination.

By following some steps before paying compensation to an executive, a tax-exempt organization can establish a presumption of reasonableness that will be difficult for the IRS to refute in many cases.

The Expertise to Help You Stay in Compliance

CapinCrouse serves more than 1,500 nonprofit clients nationwide, and we understand the complexities of the IRS’s executive compensation rules. We can use that insight and expertise to help you:

• Navigate the executive compensation requirements
• Meet the rebuttable presumption of reasonableness
• Comply with IRS filing requirements
• Protect your organization’s reputation and leadership

An Executive Compensation Study by CapinCrouse consists of two service components to meet your organization’s specific needs:

• Compensation Study – A comprehensive analysis of the position and compensation using industry compensation study surveys and the development of specific data sets. You will receive a written report providing the data support for presumption of reasonableness.
• Compensation Comparison Analysis – An analysis of compensation data from five to eight comparable organizations, compiled into a worksheet with a narrative explaining our findings and Form 990/IRS filing requirements.

This will give your governing board the tools it needs to compare, quantify, analyze, and approve compensation amounts for your leadership in a structured and informed manner.

Each study is valid for two years. If you have a leadership change or a previous compensation study is reaching the two-year mark, we recommend that you have a new study completed.

Get Peace of Mind about Your Executive Compensation

CapinCrouse can help you offer your executives competitive compensation while complying with IRS rules, protecting your executives and board members from costly penalties, and maintaining public trust.

Please contact us to learn more and discuss your organization’s specific needs.