Details of Public Law 119-21, section 70416 , One Big Beautiful Bill Act

Previously, the Tax Cuts and Jobs Act (Public Law 115-97, section 13602) added a federal law that imposes an excise tax on an applicable tax-exempt organization for remuneration paid to covered employees computed on the remuneration paid in excess of $1 million, plus any excess parachute payments. Specifically, the excise tax is equal to 21 percent, and is imposed on (1) remuneration (excluding any excess parachute payment) paid in any taxable year by an applicable tax-exempt organization to a covered employee that exceeds $1 million, plus (2) any excess parachute payment paid by an applicable tax-exempt organization to any covered employee, as defined.

A covered employee was defined as any current or former employee of an applicable tax-exempt organization if the employee is (1) one of the five highest compensated employees of the organization for the tax year, or (2) was a covered employee of the organization, or any predecessor of the organization.

This provision modifies the definition of covered employee to provide that the excise tax applies to any employee, including any former employee who was an employee of the organization, or of a predecessor organization, during any taxable year beginning after December 31, 2016.

The FTB does not administer these types of excise taxes.