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Nonprofit compensation, explained.
Practical, plain-English guides to executive pay, the §4958 reasonableness process, and building board decisions that hold up, written by RB Consulting Services, LLC.
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Start here — what the data is
The annual information return most tax-exempt organizations must file, why it is public, which version applies, and why the data always lags.
Form 990 Literacy How to Read a Form 990 for Executive Pay Without Being MisledExecutive pay is in Part VII and, above $150,000, Schedule J. What each figure includes, and three traps: calendar vs. fiscal year, the filing lag, and Part IX.
Form 990 Literacy Form 990 Schedule J, Explained: The Executive Compensation ScheduleWho appears on Schedule J, what each Part II column captures (base, bonus, other reportable, deferred, nontaxable), and why the total is not a W-2.
Setting executive pay
A compensation philosophy is the board's written statement of which market it pays against, where in that market it aims, and what justifies a departure.
Benchmarking Method Nonprofit Executive Compensation Benchmarking: A Board's GuideHow nonprofit boards benchmark executive pay in six steps: where the data comes from, which figure to compare, how to pick peers, and what to document.
Benchmarking Method Building a Compensation Peer Group for a NonprofitWhat a defensible nonprofit peer group requires: budget first (size explains roughly four to six times what geography or mission does), then mission and market.
§4958 Compliance What Counts as “Appropriate Comparability Data” for Nonprofit Executive Pay?The four forms of comparability data the federal regulation names for nonprofit executive pay, and how to match peers on budget, role, sector and geography.
§4958 Compliance Is Our Executive Director Overpaid? How a Board Actually Answers ThatHow a board tests whether its executive director's pay is reasonable: pick peers by budget size, compare total pay, state the years, and document the decision.
Documenting the decision
The three steps under Treas. Reg. §53.4958-6 that shift the burden of proof to the IRS: independent advance approval, comparability data, and documentation.
Board Governance How to Document a Nonprofit Executive Pay Decision: What the Minutes Must RecordWhat minutes approving a nonprofit executive's pay should record, when they must be prepared, and the gaps that break the rebuttable presumption.
The tax exposure
IRC §4958 taxes people, not the charity: 25% of excess pay on the executive (200% if uncorrected) and 10%, up to $20,000, on managers who knowingly approved it.
§4960 Excise Tax The Section 4960 Excise Tax: When Nonprofit Pay Crosses $1 MillionThe 21% excise tax on nonprofit pay over $1 million and on excess parachute payments, and how the 2025 law made any employee a potential covered employee.
Board Governance Can Nonprofit Board Members Be Paid? Federal Rules, Trade-offs, DisclosureReasonable board compensation is lawful for public charities, with §4958 exposure, independence consequences on the Form 990, and state-law limits.