---
kind: "section"
citation: "26 U.S.C. § 4958"
title: "26"
title_heading: "Internal Revenue Code"
number: "4958"
heading: "Taxes on excess benefit transactions"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/26/4958"
units:
  - "Subtitle D — Miscellaneous Excise Taxes"
  - "Chapter 42 — Private Foundations; and Certain Other Tax-Exempt Organizations"
  - "Subchapter D — Failure by Certain Charitable Organizations To Meet Certain Qualification Requirements"
---

# §4958. Taxes on excess benefit transactions

- (a) **Initial taxes—**
  - (1) **On the disqualified person—** There is hereby imposed on each excess benefit transaction a tax equal to 25 percent of the excess benefit. The tax imposed by this paragraph shall be paid by any [disqualified person](/usc/26/4946.md?p=a-1) referred to in [subsection (f)(1)](#f-1) with respect to such transaction.
  - (2) **On the management—** In any case in which a tax is imposed by [paragraph (1)](#a-1), there is hereby imposed on the participation of any organization manager in the excess benefit transaction, knowing that it is such a transaction, a tax equal to 10 percent of the excess benefit, unless such participation is not willful and is due to reasonable cause. The tax imposed by this paragraph shall be paid by any organization manager who participated in the excess benefit transaction.
- (b) **Additional tax on the disqualified person—** In any case in which an initial tax is imposed by [subsection (a)(1)](#a-1) on an excess benefit transaction and the excess benefit involved in such transaction is not corrected within the [taxable period](/usc/26/4482.md?p=c-4), there is hereby imposed a tax equal to 200 percent of the excess benefit involved. The tax imposed by this subsection shall be paid by any [disqualified person](/usc/26/4946.md?p=a-1) referred to in [subsection (f)(1)](#f-1) with respect to such transaction.
- (c) **Excess benefit transaction; excess benefit—** For purposes of this section—
  - (1) **Excess benefit transaction—**
    - (A) **In general—** The term “excess benefit transaction” means any transaction in which an economic benefit is provided by an applicable tax-exempt organization directly or [indirectly](/usc/26/101.md?p=a-3-B) to or for the use of any [disqualified person](/usc/26/4946.md?p=a-1) if the [value](/usc/26/4462.md?p=a-5-A) of the economic benefit provided exceeds the [value](/usc/26/4462.md?p=a-5-A) of the consideration (including the performance of services) received for providing such benefit. For purposes of the preceding sentence, an economic benefit shall not be treated as consideration for the performance of services unless such organization clearly indicated its intent to so treat such benefit.
    - (B) **Excess benefit—** The term “excess benefit” means the excess referred to in [subparagraph (A)](#c-1-A).
  - (2) **Special rules for donor advised funds—** In the case of any donor advised fund (as defined in [section 4966(d)(2)](/usc/26/4966.md?p=d-2))—
    - (A) the term “excess benefit transaction” includes any grant, loan, compensation, or other similar payment from such fund to a [person](/usc/26/4377.md?p=b-1-A) described in [subsection (f)(7)](#f-7) with respect to such fund, and
    - (B) the term “excess benefit” includes, with respect to any transaction described in [subparagraph (A)](#c-2-A), the amount of any such grant, loan, compensation, or other similar payment.
  - (3) **Special rules for supporting organizations—**
    - (A) **In general—** In the case of any organization described in [section 509(a)(3)](/usc/26/509.md?p=a-3)—
      - (i) the term “excess benefit transaction” includes—
        - (I) any grant, loan, compensation, or other similar payment provided by such organization to a [person](/usc/26/4377.md?p=b-1-A) described in [subparagraph (B)](#c-3-B), and
        - (II) any loan provided by such organization to a [disqualified person](/usc/26/4946.md?p=a-1) (other than an organization described in [subparagraph (C)(ii)](#c-3-C-ii)), and
      - (ii) the term “excess benefit” includes, with respect to any transaction described in [clause (i)](#c-3-A-i), the amount of any such grant, loan, compensation, or other similar payment.
    - (B) **Person described—** A [person](/usc/26/4377.md?p=b-1-A) is described in this subparagraph if such [person](/usc/26/4377.md?p=b-1-A) is—
      - (i) a [substantial contributor](/usc/26/4946.md?p=a-2) to such organization,
      - (ii) a member of the family (determined under [section 4958(f)(4)](#f-4)) of an individual described in [clause (i)](#c-3-B-i), or
      - (iii) a 35-percent controlled entity (as defined in [section 4958(f)(3)](#f-3) by substituting “[persons](/usc/26/4377.md?p=b-1-A) described in clause [(i)](#c-3-B-i) or [(ii)](#c-3-B-ii) of section 4958(c)(3)(B)” for “[persons](/usc/26/4377.md?p=b-1-A) described in subparagraph [(A)](#c-1-A) or [(B)](#c-1-B) of paragraph (1)” in [subparagraph (A)(i)](#c-3-A-i) thereof).
    - (C) **Substantial contributor—** For purposes of this paragraph—
      - (i) **In general—** The term “[substantial contributor](/usc/26/4946.md?p=a-2)” means any [person](/usc/26/4377.md?p=b-1-A) who contributed or bequeathed an aggregate amount of more than $5,000 to the organization, if such amount is more than 2 percent of the total contributions and bequests received by the organization before the close of the taxable year of the organization in which the contribution or bequest is received by the organization from such [person](/usc/26/4377.md?p=b-1-A). In the case of a trust, such term also means the creator of the trust. Rules similar to the rules of subparagraphs [(B)](/usc/26/507.md?p=d-2-B) and [(C)](/usc/26/507.md?p=d-2-C) of section 507(d)(2) shall apply for purposes of this subparagraph.
      - (ii) **Exception—** Such term shall not include—
        - (I) any organization described in paragraph [(1)](/usc/26/509.md?p=a-1), [(2)](/usc/26/509.md?p=a-2), or [(4)](/usc/26/509.md?p=a-4) of section 509(a), and
        - (II) any organization which is treated as described in such [paragraph (2)](#c-2) by reason of the last sentence of [section 509(a)](/usc/26/509.md?p=a) and which is a supported organization (as defined in [section 509(f)(3)](/usc/26/509.md?p=f-3)) of the organization to which [subparagraph (A)](#c-3-A) applies.
  - (4) **Authority to include certain other private inurement—** To the extent provided in regulations prescribed by the Secretary, the term “excess benefit transaction” includes any transaction in which the amount of any economic benefit provided to or for the use of a [disqualified person](/usc/26/4946.md?p=a-1) is determined in whole or in part by the revenues of 1 or more activities of the organization but only if such transaction results in inurement not permitted under paragraph [(3)](/usc/26/501.md?p=c-3) or [(4)](/usc/26/501.md?p=c-4) of section 501(c), as the case may be. In the case of any such transaction, the excess benefit shall be the amount of the inurement not so permitted.
- (d) **Special rules—** For purposes of this section—
  - (1) **Joint and several liability—** If more than 1 [person](/usc/26/4377.md?p=b-1-A) is liable for any tax imposed by [subsection (a)](#a) or [subsection (b)](#b), all such [persons](/usc/26/4377.md?p=b-1-A) shall be jointly and severally liable for such tax.
  - (2) **Limit for management—** With respect to any 1 excess benefit transaction, the maximum amount of the tax imposed by [subsection (a)(2)](#a-2) shall not exceed $20,000.
- (e) **Applicable tax-exempt organization—** For purposes of this subchapter, the term “applicable tax-exempt organization” means—
  - (1) any organization which (without regard to any excess benefit) would be described in paragraph [(3)](/usc/26/501.md?p=c-3), [(4)](/usc/26/501.md?p=c-4), or [(29)](/usc/26/501.md?p=c-29) of section 501(c) and exempt from tax under [section 501(a)](/usc/26/501.md?p=a), and
  - (2) any organization which was described in [paragraph (1)](#e-1) at any time during the 5-year period ending on the date of the transaction.

  Such term shall not include a private foundation (as defined in [section 509(a)](/usc/26/509.md?p=a)).

- (f) **Other definitions—** For purposes of this section—
  - (1) **Disqualified person—** The term “[disqualified person](/usc/26/4946.md?p=a-1)” means, with respect to any transaction—
    - (A) any [person](/usc/26/4377.md?p=b-1-A) who was, at any time during the 5-year period ending on the date of such transaction, in a position to exercise substantial influence over the affairs of the organization,
    - (B) a member of the family of an individual described in [subparagraph (A)](#f-1-A),
    - (C) a 35-percent controlled entity,
    - (D) any [person](/usc/26/4377.md?p=b-1-A) who is described in subparagraph [(A)](#f-1-A), [(B)](#f-1-B), or [(C)](#f-1-C) with respect to an organization described in [section 509(a)(3)](/usc/26/509.md?p=a-3) and organized and operated exclusively for the benefit of, to perform the functions of, or to carry out the purposes of the applicable tax-exempt organization,
    - (E) which involves a donor advised fund (as defined in [section 4966(d)(2)](/usc/26/4966.md?p=d-2)), any [person](/usc/26/4377.md?p=b-1-A) who is described in [paragraph (7)](#f-7) with respect to such donor advised fund (as so defined), and
    - (F) which involves a sponsoring organization (as defined in [section 4966(d)(1)](/usc/26/4966.md?p=d-1)), any [person](/usc/26/4377.md?p=b-1-A) who is described in [paragraph (8)](#f-8) with respect to such sponsoring organization (as so defined).
  - (2) **Organization manager—** The term “organization manager” means, with respect to any applicable tax-exempt organization, any officer, director, or trustee of such organization (or any individual having powers or responsibilities similar to those of officers, directors, or trustees of the organization).
  - (3) **35-percent controlled entity—**
    - (A) **In general—** The term “35-percent controlled entity” means—
      - (i) a corporation in which [persons](/usc/26/4377.md?p=b-1-A) described in subparagraph [(A)](#f-1-A) or [(B)](#f-1-B) of paragraph (1) own more than 35 percent of the total combined voting power,
      - (ii) a partnership in which such [persons](/usc/26/4377.md?p=b-1-A) own more than 35 percent of the profits interest, and
      - (iii) a trust or estate in which such [persons](/usc/26/4377.md?p=b-1-A) own more than 35 percent of the beneficial interest.
    - (B) **Constructive ownership rules—** Rules similar to the rules of paragraphs [(3)](/usc/26/4946.md?p=a-3) and [(4)](/usc/26/4946.md?p=a-4) of section 4946(a) shall apply for purposes of this paragraph.
  - (4) **Family members—** The members of an individual’s family shall be determined under [section 4946(d)](/usc/26/4946.md?p=d); except that such members also shall include the brothers and sisters (whether by the whole or half blood) of the individual and their spouses.
  - (5) **Taxable period—** The term “[taxable period](/usc/26/4482.md?p=c-4)” means, with respect to any excess benefit transaction, the period beginning with the date on which the transaction occurs and ending on the earliest of—
    - (A) the date of mailing a notice of deficiency under [section 6212](/usc/26/6212.md) with respect to the tax imposed by [subsection (a)(1)](#a-1), or
    - (B) the date on which the tax imposed by [subsection (a)(1)](#a-1) is assessed.
  - (6) **Correction—** The terms “correction” and “[correct](/usc/26/4963.md?p=d-1)” mean, with respect to any excess benefit transaction, undoing the excess benefit to the extent possible, and taking any additional measures necessary to place the organization in a financial position not worse than that in which it would be if the [disqualified person](/usc/26/4946.md?p=a-1) were dealing under the highest fiduciary standards, except that in the case of any correction of an excess benefit transaction described in [subsection (c)(2)](#c-2), no amount repaid in a manner prescribed by the Secretary may be held in any donor advised fund.
  - (7) **Donors and donor advisors—** For purposes of [paragraph (1)(E)](#f-1-E), a [person](/usc/26/4377.md?p=b-1-A) is described in this paragraph if such [person](/usc/26/4377.md?p=b-1-A)—
    - (A) is described in [section 4966(d)(2)(A)(iii)](/usc/26/4966.md?p=d-2-A-iii),
    - (B) is a member of the family of an individual described in [subparagraph (A)](#f-7-A), or
    - (C) is a 35-percent controlled entity (as defined in [paragraph (3)](#f-3) by substituting “[persons](/usc/26/4377.md?p=b-1-A) described in subparagraph [(A)](#f-7-A) or [(B)](#f-7-B) of paragraph (7)” for “[persons](/usc/26/4377.md?p=b-1-A) described in subparagraph [(A)](#f-1-A) or [(B)](#f-1-B) of paragraph (1)” in subparagraph (A)(i) thereof).
  - (8) **Investment advisors—** For purposes of [paragraph (1)(F)](#f-1-F)—
    - (A) **In general—** A [person](/usc/26/4377.md?p=b-1-A) is described in this paragraph if such [person](/usc/26/4377.md?p=b-1-A)—
      - (i) is an investment advisor,
      - (ii) is a member of the family of an individual described in [clause (i)](#f-8-A-i), or
      - (iii) is a 35-percent controlled entity (as defined in [paragraph (3)](#f-3) by substituting “[persons](/usc/26/4377.md?p=b-1-A) described in clause [(i)](#f-8-A-i) or [(ii)](#f-8-A-ii) of paragraph (8)(A)” for “[persons](/usc/26/4377.md?p=b-1-A) described in subparagraph [(A)](#f-1-A) or [(B)](#f-1-B) of paragraph (1)” in [subparagraph (A)(i)](#f-8-A-i) thereof).
    - (B) **Investment advisor defined—** For purposes of [subparagraph (A)](#f-8-A), the term “investment advisor” means, with respect to any sponsoring organization (as defined in [section 4966(d)(1)](/usc/26/4966.md?p=d-1)), any [person](/usc/26/4377.md?p=b-1-A) (other than an [employee](/usc/26/101.md?p=i-3) of such organization) compensated by such organization for managing the investment of, or providing investment advice with respect to, assets maintained in donor advised funds (as defined in [section 4966(d)(2)](/usc/26/4966.md?p=d-2)) owned by such organization.

## Source credit

(Added Pub. L. 104–168, title XIII, § 1311(a), July 30, 1996, 110 Stat. 1475; amended Pub. L. 109–280, title XII, §§ 1212(a)(3), 1232(a), (b), 1242(a), (b), Aug. 17, 2006, 120 Stat. 1074, 1098, 1099, 1104; Pub. L. 110–172, § 3(i), Dec. 29, 2007, 121 Stat. 2475; Pub. L. 111–148, title I, § 1322(h)(3), Mar. 23, 2010, 124 Stat. 192; Pub. L. 115–141, div. U, title IV, § 401(a)(224), Mar. 23, 2018, 132 Stat. 1194.)

## Notes

### Editorial Notes

### Codification

Sections 1212(a)(3), 1232(a), (b), and 1242(a), (b) of Pub. L. 109–280, which directed the amendment of section 4958 without specifying the act to be amended, were executed to this section, which is section 4958 of the Internal Revenue Code of 1986, to reflect the probable intent of Congress. See 2006 Amendment notes below.

### Amendments

2018—Subsec. (f)(1)(D). Pub. L. 115–141 substituted comma for period at end.

2010—Subsec. (e)(1). Pub. L. 111–148 substituted “paragraph (3), (4), or (29)” for “paragraph (3) or (4)”.

2007—Subsec. (c)(3)(A)(i)(II). Pub. L. 110–172, § 3(i)(1), substituted “subparagraph (C)(ii)” for “paragraph (1), (2), or (4) of section 509(a)”.

Subsec. (c)(3)(C)(ii). Pub. L. 110–172, § 3(i)(2), reenacted heading without change and amended text generally. Prior to amendment, text read as follows: “Such term shall not include any organization described in paragraph (1), (2), or (4) of section 509(a).”

2006—Subsec. (c)(2). Pub. L. 109–280, § 1232(b)(1), added par. (2). Former par. (2) redesignated (3). See Codification note above.

Subsec. (c)(3). Pub. L. 109–280, § 1242(b), added par. (3). Former par. (3) redesignated (4). See Codification note above.

Pub. L. 109–280, § 1232(b)(1), redesignated par. (2) as (3). See Codification note above.

Subsec. (c)(4). Pub. L. 109–280, § 1242(b), redesignated par. (3) as (4). See Codification note above.

Subsec. (d)(2). Pub. L. 109–280, § 1212(a)(3), substituted “$20,000” for “$10,000”. See Codification note above.

Subsec. (f)(1)(D). Pub. L. 109–280, § 1242(a), added subpar. (D). Former subpar. (D) redesignated (E). See Codification note above.

Pub. L. 109–280, § 1232(a)(1), added subpar. (D). See Codification note above.

Subsec. (f)(1)(E). Pub. L. 109–280, § 1242(a), redesignated subpar. (D) as (E). Former subpar. (E) redesignated (F). See Codification note above.

Pub. L. 109–280, § 1232(a)(1), added subpar. (E). See Codification note above.

Subsec. (f)(1)(F). Pub. L. 109–280, § 1242(a), redesignated subpar. (E) as (F). See Codification note above.

Subsec. (f)(6). Pub. L. 109–280, § 1232(b)(2), inserted “, except that in the case of any correction of an excess benefit transaction described in subsection (c)(2), no amount repaid in a manner prescribed by the Secretary may be held in any donor advised fund” after “standards”. See Codification note above.

Subsec. (f)(7), (8). Pub. L. 109–280, § 1232(a)(2), added pars. (7) and (8). See Codification note above.

### Statutory Notes and Related Subsidiaries

### Effective Date of 2007 Amendment

Amendment by Pub. L. 110–172 effective as if included in the provisions of the Pension Protection Act of 2006, Pub. L. 109–280, to which such amendment relates, see section 3(j) of Pub. L. 110–172, set out as a note under section 170 of this title.

### Effective Date of 2006 Amendment

Amendment by section 1212(a)(3) of Pub. L. 109–280 applicable to taxable years beginning after Aug. 17, 2006, see section 1212(f) of Pub. L. 109–280, set out as a note under section 4941 of this title.

Pub. L. 109–280, title XII, § 1232(c), Aug. 17, 2006, 120 Stat. 1099, provided that: “The amendments made by this section [amending this section] shall apply to transactions occurring after the date of the enactment of this Act [Aug. 17, 2006].”

Pub. L. 109–280, title XII, § 1242(c), Aug. 17, 2006, 120 Stat. 1105, provided that: Subsection (a).—The amendments made by subsection (a) [amending this section] shall apply to transactions occurring after the date of the enactment of this Act [Aug. 17, 2006]. Subsection (b).—The amendments made by subsection (a) [probably should be “subsection (b)”, amending this section] shall apply to transactions occurring after July 25, 2006.”

### Effective Date

Section applicable to excess benefit transactions occurring on or after Sept. 14, 1995, and not applicable to any benefit arising from a transaction pursuant to any written contract which was binding on Sept. 13, 1995, and at all times thereafter before such transaction occurred, see section 1311(d)(1), (2) of Pub. L. 104–168, set out as an Effective Date of 1996 Amendment note under section 4955 of this title.