### Question
How is the term covered employee defined?


### Answer
The term **covered employee** is defined in *26 U.S.C. § 4960* as the following:

> any employee (including any former employee) of an applicable tax-exempt organization if the employee—


(A) is one of the 5 highest compensated employees of the organization for the taxable year, or


(B) was a covered employee of the organization (or any predecessor) for any preceding taxable year beginning after December 31, 2016

#### Citation:
  - *26 U.S.C. § 4960*
  - Heading: **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**

