An Administrator's Guide to California Private School Law Compendium

The school’s need for particular services of the person,

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 The uniqueness of person’s background, training, education, experience, responsibilities,  If the compensation was approved by an independent Board of Directors or its approved committee,  The school should have adequate documentation that its Board of Directors approved the package and that the disqualified person or his or her relative did not participate in the approval process,  The size and complexity of the school’s income and assets and number of employees,  The disqualified person’s prior compensation arrangements,  The disqualified person’s job performance,  The school should maintain an adequate description of the disqualified person’s duties and responsibilities,  The amount of hours worked by the disqualified person, and  The relationship of disqualified person’s compensation to compensation paid to the school’s other employees. If the school can show documentation displaying the disqualified person’s compensation package is fair and reasonable, the school should have a strong defense that it is not providing the disqualified person an excess benefit and thus avoid potential sanctions for an excess benefit transaction. Rebuttable Presumption The Internal Revenue Service (“IRS”) created a rebuttable presumption that payments to disqualified persons are presumed to be reasonable and not excessive if the following conditions are satisfied by the school:  The total compensation package was approved in advance by the school’s Board or the Board’s authorized committee and no individuals who had an actual or potential conflict of interest with respect to the compensation arrangement participated in deliberations. 3  The school’s Board or the Board’s authorized committee obtained and relied on appropriate comparability data prior to making its determination. 4  If the school’s annual gross receipts are less than $1,000,000, the Board will  III.

be considered to have appropriate comparability data if it has data on compensation paid by three comparable schools in the same or similar communities for similar services. 5

An Administrator’s Guide to California Private School Law - Compendium ©2019 Liebert Cassidy Whitmore 14