Exempt Organizations Technical Guide›TG 65: Excise Taxes - Excess Benefit Transactions - IRC Section 4958›Table of Contents
Initial Tax on Disqualified Persons
0224 Publ 5835 (PDF) · 2026-10-03 edition · updated 2026-10-04 · United States
(1) Section 4958(a)(1) imposes a tax equal to 25% of the excess benefit on each
excess benefit transaction between an ATEO and a disqualified person. The initial tax is also sometimes referred to as the "First Tier Tax."
a. The tax is imposed on the entire amount of the payment in the case of
certain transactions involving DAFs or supporting organizations.
Note: See sections II.C.8 and II.C.9 above for the special rules for DAFs and supporting organizations.
Note: Also see section II.H below regarding abatement of the 25% tax.
(2) The tax is paid by the disqualified person who received an excess benefit from the
transaction. See Treas. Reg. 53.4958-1(c)(1).
a. All the disqualified persons are jointly and severally liable for the tax if more
than one disqualified person is liable for the 25% tax. See Section 4958(d)(1) and Treas. Reg. 53.4958-1(c)(1).
b. Joint and several liability means that all or a portion of the 25% tax may be
assessed against and collected from one or more of the disqualified persons who received an excess benefit from the excess benefit transaction.
c. However, the total tax collected must not exceed 100% of the 25% tax.
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