Intermediate Sanctions allow the Internal Revenue Service to impose excise taxes on individuals who improperly benefit from transactions with an exempt organization. Intermediate sanctions apply to all organizations which are or were described in Section 501(c)(3) or Section 501(c)(4) of the Internal Revenue Code at any time during the last five years, except for private foundations (which are already subject to their own excise tax law), governmental entities and affiliates that are exempt from taxation without regard to section 501(a) or do not have to file annual returns, and foreign organizations that receive substantially all of their support from non-U.S. sources.
Intermediate Sanctions may be imposed on any "disqualified person" who receives an excess benefit from a covered organization and on each "organization manager" who approves the excess benefit transaction. A disqualified person is any person who is in a position to exercise substantial influence over the affairs of an exempt organization typically consisting of the following:
- A family member
- An organization
- Members of the Board
- Executive officer of the organization
- Treasurer or Chief Financial Officer
An organization manager is defined as any officer, director, trustee, or person having similar responsibilities regardless of his or her title. An organization manager also includes anyone serving on the Board.