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ASAE petitions Treasury about tax on pay over $1M

Group seeks grandfathering of compensation under contracts signed before new tax law, or revised rules on 457(f) plan benefits


Dec. 14, 2018
By William Ehart

The Tax Cut and Jobs Act of 2017 was a bonanza for high earners and corporations, but contained a bitter pill for many tax-exempt groups: A 21 percent excise tax on compensation above $1 million for the five highest-paid employees.

The problem is, as ASAE says in a recent letter to the Treasury Department, many organizations that pay their CEOs and top staff much less than $1 million annually could incur the new tax when they make payouts of deferred income as executives near retirement.

“Those dollars were earned over a period of years. To be treated as one payment in one year we think is unfair,” ASAE CEO John Graham told CEO Update. “And those dollars that were earned prior to (the new law) should be exempted at a minimum, because organizations made these decisions before they knew what the tax law was going to be.