Taxing Jerry Falwell’s Golden Parachute Payments (severance over $10M)


After analyzing Jerry Falwell Jr’s Liberty University compensation, Trinity Foundation estimates tax penalties of $1,530,383 on golden parachute payments of $10.5 million.

Excessive compensation is a scandalously common practice in many religious institutions that needs to be carefully researched and exposed.

After a series of embarrassing disclosures of moral failures, Jerry Falwell Jr. has resigned as president of Liberty University.

Falwell is expected to receive $10.5 million after resigning from the world’s largest evangelical university. According to The Wall Street Journal, “Mr. Falwell is due his $1.25 million salary for two years, followed by a lump-sum payment of about $8 million, because of a clause in his contract that allowed him to resign with full pay if his responsibilities were curtailed.”

Liberty University alumni, current students, faculty, journalists and concerned Christians are questioning the legality of these payments. If Falwell’s contract included a morality clause, the board of trustees could have fired him for cause and no severance package would be required.

Offering Falwell two years’ worth of severance pay is questionable at best. In an article addressing the issue of severance payments to nonprofit employees, law firm Wagenmaker and Oberly suggests that Liberty must be able to justify the expense.

“Generally, provision of a few weeks to a few months of severance pay should be deemed reasonable under many circumstances.  In contrast, a year’s worth of severance pay would be viewed as highly unusual and therefore would warrant extensive due diligence and substantiation to justify such a large severance package.”

If one year of severance is highly unusual, is two years defensible in tax court?

Congress also takes a dim view of large lucrative severance payments, known as golden parachutes, and has attempted to discourage them by creating an excess benefits transactions excise tax.

An excise tax of 21% is collected when severance payments to officers and highly compensated employees (income of $125,000 or more in a year) are more than three times the size of their base compensation amount. The base amount is an average of annual compensation for the five most recent years before leaving the job.

To estimate the excise tax owed by Falwell, we must first estimate his annual compensation because this financial information has not been made available to the public. The Form 990, a financial disclosure document filed with the IRS, is not yet available for Falwell’s last two years at Liberty.

Annual Compensation

2020 – $1,167,113 estimate

2019 – $1,116,107 estimate

2018 – $1,067,330

2017 – $1,018,527

2016 – $985,021

Estimated Base amount: $1,070,820

Estimated Safe Harbor: $3,212,460

Estimated amount subject to excise tax: $7,287,540

Estimated excise tax: $1,530,383



  • Annual compensation estimates are based on an annual increase of 4.57 percent which is the percentage of increase between 2017 and 2018.
  • The IRS has created a Golden Parachute Payments Guide which explains in simple terms how the excise tax is derived. However, it is outdated because the excise tax has been increased to 21%. For an updated and more thorough explanation of these issues, check out the IRS document Interim Guidance Under Section 4960.

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