By Liz Santos, VP Marketing, BFB Gallagher.
Chances are you’re still trying to make sense of the recent tax law changes. The changes affect nearly all taxpayers and touch a wide variety of taxes- including corporate, estate, partnership and “pass through” business entities, and individual. The changes also impact tax-exempt organizations. Known as the Tax Cuts and Jobs Acts (TCJA), the tax law changes amend the Internal Revenue Code (tax code).
The TCJA created Section 4960, which provides for an excise tax on tax-exempt entities like credit unions. The excise tax, paid by the credit union, applies on (1) compensation in excess of $1 million and (2) parachute payments for highly-compensated employees. BFB Gallagher recently explained the ins and outs of the new excise tax during a webinar for the National Association of Federally-Insured Credit Unions. The recording and slides are available online ».
Here’s the good news: using a split dollar plan can help you avoid the excise tax because plan payments do not count as compensation when calculating the excise tax. A split dollar plan also converts the benefit from a liability to a growing asset. And you can restructure an existing 457(f) plan to reduce or eliminate the excise tax.
BFB Gallagher can help you determine if your credit union is subject to the excise tax. Better yet, we can help you develop an executive benefits program that is regulator-friendly and tax-advantaged. Feel free to contact me to schedule a 30-minute discovery call.
And, just in case you’re interested in the full text of the new law, you can find it here ».