New Excise Tax Levied on Non-Profit Organizations

The Problem

In January of 2019, the IRS issued Notice 2019-09 to clarify changes made to Section 4960 of the Internal Revenue Code (IRC) by the Tax Cuts and Jobs Act (TCJA).  Within this notice, the IRS levies a 21% excise tax on compensation (including retirement plan payments) made to “covered employees” of applicable tax-exempt organizations (ATEO) in excess of $1M in a given year.

Potential Solution – Split Dollar Life Insurance

Mullin Barens Sanford Financial has developed a method of reducing or eliminating this excise tax liability using split dollar life insurance – a life insurance policy shared by an organization and an employee of that organization.
In exchange for some current cash compensation, an executive would receive tax-deferred, and potentially tax-free retirement funds through the policy.  Importantly, the tax-exempt organization recoups funds used to initiate the policy at the executive’s death.
In entering into this arrangement, the not for profit entity has reduced its own excise tax liability by reducing current cash compensation AND providing tax efficient retirement plan payments.

Mullin Barens Sanford Financial Can Help

Long term arrangements such as split dollar life insurance require a long-term partner.  Mullin Barens Sanford Financial has insurance professionals with 30+ years of experience and many client relationships that exceed 30 years.   We can help guide your firm through the process of understanding the arrangement, modeling retirement scenarios, and assisting all stakeholders throughout the life of the policy.
Please contact us if we may be of further assistance.


Mullin Barens Sanford Financial

Through a powerful combination of independence and experience, Mullin Barens Sanford Financial and Insurance Services (MBS Financial) is a leading consulting firm that assists companies with 409A and other executive benefit needs.

Disclaimer: The materials are designed to convey accurate and authoritative information concerning the subject matter covered. However, they are provided with the understanding that Mullin Barens Sanford does not engage in the practice of law, or give tax, legal or accounting advice. For advice in these areas please consult your appropriate advisors.

© 2020 Mullin Barens Sanford Financial and Insurance Services, LLC. All Rights Reserved.
2242 Purdue Avenue, Los Angeles, California 90064 | Website:
Securities offered through M Holdings Securities, Inc., a Registered Broker/Dealer, Member FINRA/SIPC.    #2939521.1