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• Author: Bruce R. Hopkins
• Profession: Leading authority on the law of tax-exempt organizations
• Pages: 237-237

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key employee

For purpos es of Form 990 reporting, a “ke y employee” of a tax-exempt organization is an

employee of the organization (other than a trustee,director,orocer) who meets the fol-

lowing three tests applied in the following order: the $150,000 test,theresponsibility test,

and the top20test. [AR §6.1(a)(1); GV §2.3; PF §4.3; CU Q 7.3, Q 7.4; PG pp. 17, 193; LI Q

6.3, Q 6.4].

kickback

A “kickback” is a paymentby a provider of goods and/or services to an agent purchasing them ,

based on some prearranged portion of the purchase price, as an inducement to the agent to

participate in the transaction. (also Administrative allowance).

knowing

In certain c ircumstanc es, an initial tax can be imposed on theparticipation of a foundation

manager in an act of self-dealing when the manager acted while “knowing” that the act was

self-dealing (IRC §4941(a)(2)). To satisfy the requirement of “knowing” in this setting, the

manager must (1) have actual knowledge of sucientfacts s o that,bas ed solely ont hose facts,

the transaction would be an act of self-dealing; (2) be aware that this act may violate the self-

dealing rules; and (3) negligently fail to make reasonable attempts to ascertain w hether the

transaction is art act of self-dealing or he or she is, in fact, aware that it is this type of an act.

The term “knowing” does not mean “having reason toknow.”Evidence tending to show that

an individual has reason to know of a particular factor or particular rule, however,is ir relevant

in determining whether he or she had actual knowledge of that fact or rule. Similar concepts

apply in connection with the jeopardizing investment and excess business holdings rules.

In the public charity context, the “knowing” standard applies in connection with the inter-

mediate sanctions rules and the tax regimes pertaining to excessive lobbying expenditures

and political campaign expenditures.[PF§§ 5.15(d), 5.15(e), 8.5(a), 8.5(b), 9.10(a); EO §§

21.12(b), 21.12(c), 22.4, 23.3; LI Q 4.63, Q 5.48].

Bruce R. Hopkins’ Nonprot Law Dictionary, First Edition. Bruce R. Hopkins.

©2015 Bruce R. Hopkins. Published 2015 by John Wiley& S ons,Inc.