E. Rebuttable Presumption

Note: This section doesn’t apply to the special definition of excess benefit transaction for certain transactions involving DAFs and supporting organizations. Please see the specials rules on sections II.C.8 and II.C.9 above.

(1) Treas. Reg. 53.4958-6 provides rules that enable an organization to establish a

rebuttable presumption that a transaction with a disqualified person isn’t an excess benefit transaction.

(2) Payments under a compensation arrangement are presumed to be reasonable

and the transfer of property, or the right to use property, is presumed to be at fair market value if all the following conditions are satisfied. See Treas. Reg. 53.49586(a).

a. Approval in Advance by an Authorized Body - The compensation

arrangement or the terms of the property transfer are approved in advance by an authorized body of the ATEO, or an entity it controls, composed entirely of individuals who don’t have a conflict of interest as to the compensation arrangement or property transfer.

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b. Comparability - The authorized body obtained and relied upon appropriate

data as to comparability before making its determination.

c. Documentation - The authorized body adequately documented the basis for

its determination concurrently with making that determination.

(3) Rebutting the Presumption - If the above three requirements are satisfied, then

the IRS may rebut the presumption only if it develops sufficient contrary evidence to rebut the probative value of the comparability data relied upon by the authorized body. See Treas. Reg. 53.4958-6(b).

a. With respect to any fixed payment, rebuttal evidence is limited to evidence

relating to facts and circumstances existing on the date the parties enter the contract pursuant to which the payment is made (except in the event of substantial nonperformance).

b. With respect to all other payments (including non-fixed payments subject to

a cap described in Treas. Reg. 53.4958-6(d)(2)), rebuttal evidence may include facts and circumstances up to the date of payment. See Treas. Reg. 53.4958-4(b)(2)(i).

(4) Absence of Presumption

a. The fact that a transaction between an ATEO and a disqualified person aren’t

subject to the rebuttable presumption of reasonableness doesn’t create any inference that the transaction is an excess benefit transaction. See Treas. Reg. 53.4958-6(e).

b. The absence of the rebuttable presumption doesn’t exempt or relieve any

person from compliance with any federal or state law imposing any obligation, duty, responsibility, or other standard of conduct as to the operation or administration of any ATEO.

(5) Reliance Period - The rebuttable presumption applies to all payments made or

transactions completed under a contract, except in the case of non-fixed payments, if the three requirements defined above in section II.E(2) were met when the parties entered the contract. See Treas. Reg. 53.4958-6(f).

(6) No Ruling Policy - The IRS won’t issue private letter rulings that any or all the

requirements for establishing the rebuttable presumption under Treas. Reg. 53.4958-6 have been satisfied. See Rev. Proc. 2024-3, 2024-1 I.R.B. 143, Section 3.01(131), updated annually.