Nonprofit Advocates Fear ‘Major Setback’ Without Coach Tax Clarity

Groups representing nonprofits want the IRS to limit a new 21% tax that they worry could inadvertently apply to highly paid employees at for-profit companies.

The 2017 tax law created tax code Section 4960, which imposes a 21% excise tax on compensation over $1 million for a nonprofit’s five highest-paid employees. The tax garnered the “coach tax” nickname because it was intended to clamp down on high-pay packages some nonprofits award to employees—coaches at public universities, for example. Groups sent comment letters to the IRS asking the agency to carve out in forthcoming rules employees who work at ...