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Name: Excess Benefit Transactions Policy
Responsible Office: Business Office

Applies to: (examples; Faculty,Staff, Students, etc)

Alumni , Faculty , Staff

Policy Overview:

Issued: 06-21-2023
Next Review Date: 06-28-2024
Frequency of Reviews: Annually

This policy provides guidance to ensure that the University complies with Internal Revenue Service regulations prohibiting a nonprofit organization from conferring unreasonable financial or economic benefits upon certain “insiders” or persons who exercise substantial influence over the organization’s affairs.

Applies to all University trustees, officers, and employees designated in this policy.




Controlled Entity

Any entity where a Disqualified Person, together with any Family Member(s), owns more than 35% voting power of a corporation, more than 35% profits interest of a partnership, or more than 35% beneficial interest in a trust or estate.

Disqualified Person

A Disqualified Person is someone who, through his/her position, relationship, powers, responsibilities, or interests, may be able to exercise substantial influence over the University’s affairs.  For purposes of this Policy references to a Disqualified Person shall also mean the Disqualified Person’s Family Member and a Controlled Entity.

Excess Benefit Transaction

Any transaction pursuant to which a financial or economic benefit conferred upon a Disqualified Person (including a Controlled Entity) exceeds the reasonable value of the consideration received by the University.

Family Member

A Disqualified Person’s spouse, domestic partner; siblings (whole or half-blood); descendants (natural or adopted); and the siblings and descendants of a Disqualified Person’s spouse or domestic partner.


Section 4958 of the Internal Revenue Code (“IRC”) imposes excise taxes on Disqualified Persons and managers who participate in an Excess Benefit Transaction.  Additionally, the IRC mandates that the University act promptly to remediate any Excess Benefit Transaction and report violations to the Internal Revenue Service (“IRS”).

Prohibition on Excess Benefit Transactions

The University will not directly or indirectly be involved in an Excess Benefit Transaction with a Disqualified Person.  The Business Office, managers, unit leaders, and other designated positions must disclose to the Vice President, Finance and Chief Financial Officer, or the General Counsel & Chief Compliance Officer, any potential transaction with a Disqualified Person.  Under the direction of the Business Office and General Counsel University administration will exercise due diligence to avoid an Excess Benefit Transaction by soliciting competitive bids to ensure that any necessary transaction with a Disqualified Person is arms-length, based on the fair market value for the particular goods or services, and that the value the University receives equals or exceeds the value of what it pays or transfers to the Disqualified Person.  Excess Benefit Transaction disclosures will be included in the annual conflict of interest disclosure forms distributed to Trustees and employees.  All persons covered by this policy shall annually sign a statement acknowledging receipt of this policy and that the recipient has read and understands its contents.  Disqualified Persons who violate this policy will be subject to IRS and University Sanctions.

Disqualified Persons

Under the IRC and implementing regulations, a Disqualified Person includes trustees, officers, and persons who are in a position to exercise substantial influence over the affairs of the University or one of its major operating units or divisions at any time during the 5-year period immediately preceding the date the Disqualified Person received an Excess Benefit from the University.  For purposes of IRC compliance, the University has identified individuals holding the following positions as a Disqualified Person:

  • Trustee
  • President
  • Dean
  • Vice President
  • Chief of Staff
  • Vice President, Finance & Chief Financial Officer
  • Assistant Vice President, Finance & Controller
  • Director, Finance

Pursuant to the IRC, a Disqualified Person’s Family Member and any Controlled Entity are also treated as a Disqualified Person. 

IRS Sanctions on Excess Benefit Transactions

The University has a legal obligation to undo any Excess Benefit Transaction or take appropriate steps to eliminate the excess benefit received by a Disqualified Person.  For example, remediation may include returning property or paying the University an amount equal to the excess benefit plus interest at the applicable federal rate.

The Disqualified Person who benefited from the transaction is liable for an excise tax equal to 25% of the excess benefit. The University must promptly notify the Disqualified Person involved in an Excess Benefit Transaction and seek to eliminate the excess benefit within 90-days of the date of the transaction.  If the Excess Benefit Transaction is not corrected within the correction period, an additional excise tax equal to 200% of the excess benefit must be imposed.  The University will file the appropriate report and remit any excise tax to the IRS.

Any University manager who knowingly participates in an Excess Benefit Transaction is also required under IRS regulations to pay an excise tax equal to 10% of the excess benefit, but not more than $20,000 for each transaction.

A manager may avoid liability by opposing a proposed Excess Benefit Transaction and reporting it to the University’s Vice President Finance, Chief Financial Officer or the General Counsel & Chief Compliance Officer (provided that such individual is not a Disqualified Person in the particular transaction).  Additionally, a manager will not be subjected to the excise tax if the manager relies on a professional opinion received from the Vice President Finance, Chief Financial Officer or the General Counsel & Chief Compliance Officer that the transaction in question is not an Excess Benefit transaction. 

University Review and Sanctions

The Vice President Finance, Chief Financial Officer and the General Counsel & Chief Compliance Officer will report any suspected violation of this policy involving a University trustee or officer and related findings to the Chair, Board of Trustees.  All other violations will be reported to the President.

In addition to excise taxes imposed by the Internal Revenue Service, the University will take appropriate steps against any Disqualified Person or manager who violates this Policy including, without limitation, remediation and corrective action to deter future violations up to and including separation from the University.


The Business Office will maintain records relating to any transaction involving a Disqualified Person and Excess Benefit Transaction to ensure compliance with IRS regulations.




Vice President Finance, Chief Financial Officer/Business Office

  • Receiving reports of Excess Benefit Transactions
  • Correcting and reporting to the IRS
  • Training
  • Annual Conflict of Interest Disclosure
  • Record Retention

General Counsel & Chief Compliance Officer/Office of the General Counsel

  • Legal advice and compliance
  • Training

Chief of Staff/President’s Office and Assistant Vice President/Human Resources

  • Communication of Policy to trustees, officers, employees
  • Training


Conflict of Interest Disclosure Form (Employees)

Conflict of Interest Acknowledgement/Disclosure Form (Trustees)

Supplemental Information: