Indirect Benefits

(1) A transaction, that would be an excess benefit transaction if the ATEO engaged in

it directly with a disqualified person, is also an excess benefit transaction when it is accomplished indirectly. An excess benefit transaction can be provided indirectly through a controlled entity or through an intermediary. See Treas. Reg.53.49584(a)(2)(i).

(2) Controlled entity - An ATEO may provide an excess benefit indirectly using one

or more entities it controls. For Section 4958 purposes, economic benefits provided by a controlled entity are treated as provided by the ATEO. See Treas. Reg. 53.4958-4(a)(2)(ii)(A). Control is defined in Treas. Reg.53.49584(a)(2)(ii)(B)(1) as follows:

a. In the case of a stock corporation, ownership (by vote or value) of more than

50% of the stock,

b. In the case of a partnership, ownership of more than 50% of the profit

interests or capital interests,

c. In the case of a nonstock organization, at least 50% of the directors or

trustees are either representatives (including trustees, directors, agents, or employees) of, or directly or indirectly controlled by, an ATEO, or

d. In the case of any other entity, ownership of more than 50% of the beneficial

interest.

Note: For purposes of control, Section 318 (relating to constructive ownership of stock) applies to determining ownership of stock in a corporation. Similar principles apply for purposes of determining ownership of interests in any other entity. See Treas. Reg. 53.4958-4(a)(2)(ii)(B)(2).

(3) Intermediary - An ATEO can also indirectly provide an excess benefit through an

intermediary. An intermediary is any person (individual or entity) who participates in a transaction with one or more disqualified persons of an ATEO. See Treas. Reg.53.4958-4(a)(2)(iii). For Section 4958 purposes, intermediary provided economic benefits are treated as provided by the organization when:

a. An ATEO provides an economic benefit to an intermediary, and

b. In connection with the receipt of the benefit by the intermediary:

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• Evidence of an oral or written agreement, or understanding that the

intermediary will provide economic benefits to or for the use of the disqualified person exists, or

• The intermediary provides economic benefits to or for the use of a

disqualified person without a significant business purpose or exempt purpose of its own.

(4) For examples of indirect economic benefits, see Treas. Reg. 53.4958-4(a)(2)(iv).