Safe Harbor Provision of The Law
Congress, in the legislative history, intended to create a rebuttable presumption of reasonableness, or safe harbor. Under this safe harbor, compensation is presumed to be reasonable and a property transfer is presumed to be at fair market value if: (1) the compensation arrangement or terms of transfer are approved, in advance, by an authorized body of the exempt organization, composed entirely of individuals without a conflict of interest, (2) the board or committee obtained and relied upon appropriate data as to comparability in making its determination; and (3) the board or committee adequately documented the basis for its determination, concurrently with making the decision.
The disqualified person or organization manager has the initial burden of proving that the compensation was reasonable. If the three criteria above are met, the burden of proof shifts to the IRS and the IRS must prove that the compensation was unreasonable. The IRS can rebut the presumption with sufficient contrary evidence showing the compensation was not reasonable or showing a transfer not to be at fair market value.
Read more about this topic: Intermediate Sanctions
Famous quotes containing the words safe, harbor, provision and/or law:
“If the vice president thinks it’s disgraceful for an unmarried woman to bear a child, and if he believes that a woman cannot adequately raise a child without a father, then he’d better make sure that abortion remains safe and legal.”
—Diane British (b. 1948)
“Reporters for tabloid newspapers beat a path to the park entrance each summer when the national convention of nudists is held, but the cult’s requirement that visitors disrobe is an obstacle to complete coverage of nudist news. Local residents interested in the nudist movement but as yet unwilling to affiliate make observations from rowboats in Great Egg Harbor River.”
—For the State of New Jersey, U.S. public relief program (1935-1943)
“The caretaking has to be done. “Somebody’s got to be the mommy.” Individually, we underestimate this need, and as a society we make inadequate provision for it. Women take up the slack, making the need invisible as we step in to fill it.”
—Mary Catherine Bateson (20th century)
“Who to himself is law, no law doth need, Offends no law, and is a king indeed.”
—George Chapman (c. 1559–1634)