Internal Revenue Code · 26 U.S.C.
§ 4958. Taxes on excess benefit transactions
Official text, no changes From the Office of the Law Revision Counsel, release point 119-121 (current through Public Law 119-121 (October 9, 2026)). Compare it with the official text at uscode.house.gov (external site).
Cite as 26 U.S.C. § 4958
At a glance
Read from the text, the source credit and the official notes. Not part of the law.
- Status
- In force
- Added
- July 30, 1996 by Pub. L. 104–168
- Last amended
- March 23, 2018 by Pub. L. 115–141
- Amendments
- 4 dated changes in the source credit
- Length
- 6 subsections · 1,821 words · about 8 min to read
- Defines
- 16 terms
- Cross-references
- cites 6; cited by 6 Code sections and 7 other regulations
- Regulations
- 8 issued under this section
In 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.
In 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.
The 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.
The term “substantial contributor” means any person who contributed or bequeathed an aggregate amount of more than $5,000 to the organization, if such amount is more than 2 percent of the total contributions and bequests received by the organization before the close of the taxable year of the organization in which the contribution or bequest is received by the organization from such person. In the case of a trust, such term also means the creator of the trust. Rules similar to the rules of subparagraphs (B) and (C) of section 507(d)(2) shall apply for purposes of this subparagraph.
To the extent provided in regulations prescribed by the Secretary, the term “excess benefit transaction” includes any transaction in which the amount of any economic benefit provided to or for the use of a disqualified person is determined in whole or in part by the revenues of 1 or more activities of the organization but only if such transaction results in inurement not permitted under paragraph (3) or (4) of section 501(c), as the case may be. In the case of any such transaction, the excess benefit shall be the amount of the inurement not so permitted.
The term “organization manager” means, with respect to any applicable tax-exempt organization, any officer, director, or trustee of such organization (or any individual having powers or responsibilities similar to those of officers, directors, or trustees of the organization).
Rules similar to the rules of paragraphs (3) and (4) of section 4946(a) shall apply for purposes of this paragraph.
The members of an individual’s family shall be determined under section 4946(d); except that such members also shall include the brothers and sisters (whether by the whole or half blood) of the individual and their spouses.
The terms “correction” and “correct” mean, with respect to any excess benefit transaction, undoing the excess benefit to the extent possible, and taking any additional measures necessary to place the organization in a financial position not worse than that in which it would be if the disqualified person were dealing under the highest fiduciary standards, except that in the case of any correction of an excess benefit transaction described in subsection (c)(2), no amount repaid in a manner prescribed by the Secretary may be held in any donor advised fund.
For purposes of subparagraph (A), the term “investment advisor” means, with respect to any sponsoring organization (as defined in section 4966(d)(1)), any person (other than an employee of such organization) compensated by such organization for managing the investment of, or providing investment advice with respect to, assets maintained in donor advised funds (as defined in section 4966(d)(2)) owned by such organization.
(Added Pub. L. 104–168, title XIII, § 1311(a), July 30, 1996, 110 Stat. 1475; amended Pub. L. 109–280, title XII, §§ 1212(a)(3), 1232(a), (b), 1242(a), (b), Aug. 17, 2006, 120 Stat. 1074, 1098, 1099, 1104; Pub. L. 110–172, § 3(i), Dec. 29, 2007, 121 Stat. 2475; Pub. L. 111–148, title I, § 1322(h)(3), Mar. 23, 2010, 124 Stat. 192; Pub. L. 115–141, div. U, title IV, § 401(a)(224), Mar. 23, 2018, 132 Stat. 1194.)
Terms defined here
Where the text says “the term … means”. Select a term to jump to its definition.
- 35-percent controlled entity § 4958(f)(3)(A)
- applicable tax-exempt organization § 4958(e)
- correct § 4958(f)(6)
- correction § 4958(f)(6)
- disqualified person § 4958(f)(1)
- excess benefit § 4958(c)(1)(B)
- excess benefit § 4958(c)(2)(B)
- excess benefit § 4958(c)(3)(A)(ii)
- excess benefit transaction § 4958(c)(1)(A)
- excess benefit transaction § 4958(c)(2)(A)
- excess benefit transaction § 4958(c)(3)(A)(i)
- excess benefit transaction § 4958(c)(4)
- investment advisor § 4958(f)(8)(B)
- organization manager § 4958(f)(2)
- substantial contributor § 4958(c)(3)(C)(i)
- taxable period § 4958(f)(5)
Regulations under this section
Treasury regulations (26 CFR) issued under § 4958
- § 53.4958-0 Table of contents.
- § 53.4958-1 Taxes on excess benefit transactions.
- § 53.4958-2 Definition of applicable tax-exempt organization.
- § 53.4958-3 Definition of disqualified person.
- § 53.4958-4 Excess benefit transaction.
- § 53.4958-6 Rebuttable presumption that a transaction is not an excess benefit transaction.
- § 53.4958-7 Correction.
- § 53.4958-8 Special rules.
Cross-references
Computed from the citations in the text of Title 26 and 26 CFR.
This section cites 6 other sections
- § 4966(d)(2) Taxes on taxable distributions
- § 509(a)(3) Private foundation defined
- § 507(d)(2) Termination of private foundation status
- § 501(c) Exemption from tax on corporations, certain trusts, etc.
- § 4946(a) Definitions and special rules
- § 6212 Notice of deficiency
Cited by 6 Code sections
- § 509(f)(2)(B)(ii) Private foundation defined
- § 4943(e)(2)(C) Taxes on excess business holdings
- § 4955(e) Taxes on political expenditures of section 501(c)(3) organizations
- § 4967(b) Taxes on prohibited benefits
- § 6033(b)(11)(A) Returns by exempt organizations
- § 7454(b) Burden of proof in fraud, foundation manager, and transferee cases
Cited in 7 regulations not issued under it
- § 1.501(c)(3)-1 Organizations organized and operated for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or for the prevention of cruelty to children or animals.
- § 1.509(a)-4 Supporting organizations.
- § 1.6033-2 Returns by exempt organizations and returns by certain nonexempt organizations.
- § 53.6071-1 Time for filing returns.
- § 301.6104(c)-1 Disclosure of certain information to State officials.
- § 301.7454-2 Burden of proof in foundation manager, etc. cases.
- § 301.7611-1 Questions and answers relating to church tax inquiries and examinations.
Amendment history
From the source credit and the official notes, newest first.
- Amended by Pub. L. 115–141Parts changed in 2018: (f)(1)(D)
- Amended by Pub. L. 111–148Parts changed in 2010: (e)(1)
- Amended by Pub. L. 110–172Parts changed in 2007: (c)(3)(A)(i)(II) (c)(3)(C)(ii)
- Amended by Pub. L. 109–280Parts changed in 2006: (c)(2) (c)(3) (c)(4) (d)(2) (f)(1)(D) (f)(1)(E) (f)(1)(F) (f)(6) (f)(7)
- Added by Pub. L. 104–168
Where it sits in the Code
- Subtitle D Miscellaneous Excise Taxes
- Chapter 42 PRIVATE FOUNDATIONS; AND CERTAIN OTHER TAX-EXEMPT ORGANIZATIONS
- Subchapter D Failure by Certain Charitable Organizations To Meet Certain Qualification Requirements
Nearby sections
- § 4958 Taxes on excess benefit transactions
- § 4959 Taxes on failures by hospital organizations
- § 4960 Tax on excess tax-exempt organization executive compensation
Official notes
Show the Law Revision Counsel's notes (amendments, effective dates)
Editorial Notes
Codification
Sections 1212(a)(3), 1232(a), (b), and 1242(a), (b) of Pub. L. 109–280, which directed the amendment of section 4958 without specifying the act to be amended, were executed to this section, which is section 4958 of the Internal Revenue Code of 1986, to reflect the probable intent of Congress. See 2006 Amendment notes below.
Amendments
2018—Subsec. (f)(1)(D). Pub. L. 115–141 substituted comma for period at end.
2010—Subsec. (e)(1). Pub. L. 111–148 substituted “paragraph (3), (4), or (29)” for “paragraph (3) or (4)”.
2007—Subsec. (c)(3)(A)(i)(II). Pub. L. 110–172, § 3(i)(1), substituted “subparagraph (C)(ii)” for “paragraph (1), (2), or (4) of section 509(a)”.
Subsec. (c)(3)(C)(ii). Pub. L. 110–172, § 3(i)(2), reenacted heading without change and amended text generally. Prior to amendment, text read as follows: “Such term shall not include any organization described in paragraph (1), (2), or (4) of section 509(a).”
2006—Subsec. (c)(2). Pub. L. 109–280, § 1232(b)(1), added par. (2). Former par. (2) redesignated (3). See Codification note above.
Subsec. (c)(3). Pub. L. 109–280, § 1242(b), added par. (3). Former par. (3) redesignated (4). See Codification note above.
Pub. L. 109–280, § 1232(b)(1), redesignated par. (2) as (3). See Codification note above.
Subsec. (c)(4). Pub. L. 109–280, § 1242(b), redesignated par. (3) as (4). See Codification note above.
Subsec. (d)(2). Pub. L. 109–280, § 1212(a)(3), substituted “$20,000” for “$10,000”. See Codification note above.
Subsec. (f)(1)(D). Pub. L. 109–280, § 1242(a), added subpar. (D). Former subpar. (D) redesignated (E). See Codification note above.
Pub. L. 109–280, § 1232(a)(1), added subpar. (D). See Codification note above.
Subsec. (f)(1)(E). Pub. L. 109–280, § 1242(a), redesignated subpar. (D) as (E). Former subpar. (E) redesignated (F). See Codification note above.
Pub. L. 109–280, § 1232(a)(1), added subpar. (E). See Codification note above.
Subsec. (f)(1)(F). Pub. L. 109–280, § 1242(a), redesignated subpar. (E) as (F). See Codification note above.
Subsec. (f)(6). Pub. L. 109–280, § 1232(b)(2), inserted “, except that in the case of any correction of an excess benefit transaction described in subsection (c)(2), no amount repaid in a manner prescribed by the Secretary may be held in any donor advised fund” after “standards”. See Codification note above.
Subsec. (f)(7), (8). Pub. L. 109–280, § 1232(a)(2), added pars. (7) and (8). See Codification note above.
Statutory Notes and Related Subsidiaries
Effective Date of 2007 Amendment
Amendment by Pub. L. 110–172 effective as if included in the provisions of the Pension Protection Act of 2006, Pub. L. 109–280, to which such amendment relates, see section 3(j) of Pub. L. 110–172, set out as a note under section 170 of this title.
Effective Date of 2006 Amendment
Amendment by section 1212(a)(3) of Pub. L. 109–280 applicable to taxable years beginning after Aug. 17, 2006, see section 1212(f) of Pub. L. 109–280, set out as a note under section 4941 of this title.
Pub. L. 109–280, title XII, § 1232(c), Aug. 17, 2006, 120 Stat. 1099, provided that: “The amendments made by this section [amending this section] shall apply to transactions occurring after the date of the enactment of this Act [Aug. 17, 2006].”
Pub. L. 109–280, title XII, § 1242(c), Aug. 17, 2006, 120 Stat. 1105, provided that:
“(1) Subsection (a).— The amendments made by subsection (a) [amending this section] shall apply to transactions occurring after the date of the enactment of this Act [Aug. 17, 2006].“(2) Subsection (b).— The amendments made by subsection (a) [probably should be “subsection (b)”, amending this section] shall apply to transactions occurring after July 25, 2006.”
Effective Date
Section applicable to excess benefit transactions occurring on or after Sept. 14, 1995, and not applicable to any benefit arising from a transaction pursuant to any written contract which was binding on Sept. 13, 1995, and at all times thereafter before such transaction occurred, see section 1311(d)(1), (2) of Pub. L. 104–168, set out as an Effective Date of 1996 Amendment note under section 4955 of this title.