Reasonable Cause Defense for Organization Managers

§ 4958. Taxes on excess benefit transactions(a) Initial taxes(1) On the disqualified personThere is hereby imposed on each excess benefit transaction a tax equal to 25 percent of the excess benefit. The tax imposed by this paragraph shall be paid by any disqualified person referred to in subsection (f)(1) with respect to such transaction. (2) On the managementIn any case in which a tax is imposed by paragraph (1), there is hereby imposed on the participation of any organization manager in the excess benefit transaction, knowing that it is such a transaction, a tax equal to 10 percent of the excess benefit, unless such participation is not willful and is due to reasonable cause. The tax imposed by this paragraph shall be paid by any organization manager who participated in the excess benefit transaction. (b) Additional tax on the disqualified personIn any case in which an initial tax is imposed by subsection (a)(1) on an excess benefit transaction and the excess benefit involved in such transaction is not corrected within the taxable period, there is hereby imposed a tax equal to 200 percent of the excess benefit involved. The tax imposed by this subsection shall be paid by any disqualified person referred to in subsection (f)(1) with respect to such transaction. (c) Excess benefit transaction; excess benefitFor purposes of this section—(1) Excess benefit transaction(A) In generalThe term “excess benefit transaction” means any transaction in which an economic benefit is provided by an applicable tax-exempt organization directly or indirectly to or for the use of any disqualified person if the value of the economic benefit provided exceeds the value of the consideration (including the performance of services) received for providing such benefit. For purposes of the preceding sentence, an economic benefit shall not be treated as consideration for the performance of services unless such organization clearly indicated its intent to so treat such benefit. (B) Excess benefitThe term “excess benefit” means the excess referred to in subparagraph (A). (2) Special rules for donor advised fundsIn the case of any donor advised fund (as defined in section 4966(d)(2))—(A) the term “excess benefit transaction” includes any grant, loan, compensation, or other similar payment from such fund to a person described in subsection (f)(7) with respect to such fund, and (B) the term “excess benefit” includes, with respect to any transaction described in subparagraph (A), the amount of any such grant, loan, compensation, or other similar payment. (3) Special rules for supporting organizations(A) In generalIn the case of any organization described in section 509(a)(3)—(i) the term “excess benefit transaction” includes—(I) any grant, loan, compensation, or other similar payment provided by such organization to a person described in subparagraph (B), and