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Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations employment with ATEO 1 commenced at the beginning of the 4-month period.
B Conclusion. Employee Bs base amount is $410,000 $60,000 + 3
$100,000 + $420,000 + $450,000/3.
Pursuant to paragraph k2 of this section, because the bonus is a payment that will not be paid more often than once per year, the bonus is not taken into account in annualizing Employee Bs compensation for the 4-month period.
iv Example 4 Effect of nonemployee compensationA Facts.
Employee C, a covered employee of ATEO 1, was not an employee of ATEO
1 for the full 5-year base period. In 2024
and 2025, Employee C is only a director of ATEO 1 and receives $30,000 per year for services as a director. On January 1, 2026, Employee C becomes an officer and covered employee of ATEO 1. Employee Cs includible compensation for services as an officer of ATEO 1 is $250,000 for each of 2026
and 2027, and $300,000 for 2028. In 2028, Employee C separates from employment with ATEO 1.
B Conclusion. Employee Cs base amount is $250,000 2 $250,000/2.
The $30,000 of directors fees paid to Employee C in each of 2024 and 2025
is not included in Employee Cs base amount calculation because it was not for services performed as an employee of ATEO 1.

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53.49604 Liability for tax on excess remuneration and excess parachute payments.

a Liability, reporting, and payment of excise taxes1 Liability. For each taxable year, with respect to each covered employee, the taxpayer is liable for tax at the rate imposed under section 11 on the sum of the excess remuneration allocated to the taxpayer under paragraph c of this section and, if the taxpayer is an ATEO, any excess parachute payment paid by the taxpayer or a predecessor during the taxable year.
2 Reporting and payment. The excise tax imposed by section 4960 is reported as provided in 53.60111b and 53.60711i and paid in the form and manner prescribed by the Commissioner.
3 Arrangements between an ATEO
and a related organization. Calculation of, and liability for, the excise tax imposed by section 4960 is separate from, and unaffected by, any arrangement that an ATEO and any related organization may have for bearing the cost of any liability for the excise tax imposed by section 4960.
4 Certain foreign related organizations. A related organization that is a foreign organization described
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in section 4948b that either is exempt from tax under section 501a or is a taxable private foundation section 4948b related organization is not liable for the excise tax imposed by section 4960. A foreign organization is an organization not created or organized in the United States or in any possession thereof, or under the law of the United States, any State, the District of Columbia, or any possession of the United States. See section 4948b and 53.49481. For purposes of this paragraph a4 and the application of section 4960 to a taxable year, an organizations status as a section 4948b related organization is determined at the end of its taxable year. However, remuneration that the section 4948b related organization pays to a covered employee of an ATEO must be taken into account by the ATEO and other related organizations for purposes of section 4960 generally, including for purposes of determining the five highest-compensated employees and the total remuneration paid to a covered employee. For example, if an ATEO and its related organization that is a section 4948b related organization each paid $600,000 remuneration to a covered employee during the applicable year, then the related organization would not be liable for the tax that would otherwise be allocable to it, and the ATEO would be liable for tax on $100,000 50 percent of the $200,000
excess remuneration paid to the employee.
5 Reserved b Amounts subject to tax1 Excess remunerationi In general. Excess remuneration means the amount of remuneration paid by an ATEO to any covered employee during an applicable year in excess of $1 million, as determined under 53.49602.
ii Exclusion for excess parachute payments. Excess remuneration does not include any amount that is an excess parachute payment as defined in paragraph b2 of this section.
2 Excess parachute payment. Excess parachute payment means an amount equal to the excess if any of the amount of any parachute payment paid by an ATEO, a predecessor of the ATEO, or a related organization, or on behalf of any such person, during the taxable year over the portion of the base amount allocated to such payment.
c Calculation of liability for tax on excess remuneration1 In general. For each taxable year, an employer is liable for the tax on excess remuneration paid in the applicable year ending with or within the employers taxable year. If, for the taxable year, remuneration paid during an applicable year by an ATEO

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or one or more related organizations to a covered employee is taken into account in determining the tax imposed on excess remuneration for that taxable year, then each employer is liable for the tax in an amount that bears the same ratio to the total tax determined under section 4960a as the amount of remuneration paid by the employer to the covered employee including remuneration paid by the employer as described in 53.49602b1, but disregarding remuneration treated as paid by the employer under 53.4960
2b2, bears to the total amount of remuneration paid by the ATEO under 53.49602 including remuneration treated as paid by the ATEO under 53.49602b2.
2 Calculation if liability is allocated from more than one ATEO with regard to an individual. If liability for the tax on excess remuneration is allocated to an employer from more than one ATEO
in a taxable year with regard to an individual that is a covered employee of each ATEO, then the employer is liable for the tax only in the capacity in which it is liable for the greatest amount of the tax with respect to that individual for the taxable year. For example, assume ATEO 1 is a related organization to both ATEO 2 and ATEO 3 and pays excess remuneration to Employee D, and Employee D is a covered employee of ATEO 1, ATEO 2, and ATEO 3. In this case, ATEO 1s liability for the tax on excess remuneration to Employee D is the highest of its liability as an ATEO, as a related organization to ATEO 2, or as a related organization to ATEO 3.
3 Calculation if liability is allocated from an ATEO with a short applicable year. If liability for the tax on excess remuneration paid to an individual is allocated to an employer from an ATEO
with a short applicable year under 53.49601c3, then the liability with respect to the excess remuneration paid to that individual is allocated in accordance with the principles of this paragraph c adjusted as necessary to avoid, to the extent possible, duplication of application of the excise tax. The Commissioner may provide additional guidance of general applicability, published in the Internal Revenue Bulletin see 601.601d2 of this chapter, on the application of this paragraph c3 to particular circumstances, including circumstances involving an ATEO with a short applicable year that has one or more related organizations and the ATEOs short applicable year and the preceding applicable year both end with or within the related organizations taxable year, such that the ATEO and related organizations are liable for the tax for
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