How PeerBasis builds comparability data.

Version 1.0 · Data vintage: IRS Form 990 e-file, 2025 processing year

PeerBasis produces compensation comparability data to support a nonprofit board's determination of reasonable executive pay under Internal Revenue Code section 4958. This page documents exactly how every figure is sourced, how comparable organizations are selected, and how the resulting distribution is computed — so the method is transparent, reproducible, and defensible.

01Data sources

PeerBasis is built entirely on authoritative public data. There is no proprietary survey and no self-reported panel.

IRS Form 990 e-file dataset

The electronic annual returns nonprofits file with the IRS, released as machine-readable XML. Compensation figures are read from Form 990, Part VII, Section A (officers, directors, trustees, key employees, and the highest-compensated employees), and organization financials from the return's summary.

IRS Business Master File (BMF)

The IRS register of exempt organizations, used to attach each organization's National Taxonomy of Exempt Entities (NTEE) code and state for sector and geographic matching.

Every comparable in a report is traceable to its original Form 990 filing.

02The benchmarking figure

PeerBasis benchmarks total compensation from the organization — reportable pay plus benefits and deferred compensation, i.e. Form 990 Part VII, Section A, columns D and F. This matches the IRC 4958 reasonableness standard, which considers all economic benefits, and how major compensation studies report pay. Using reportable salary alone would understate the economic benefit a board is approving.

Each organization's chief executive is identified by role from the reported title (executive director, CEO, or president serving as chief executive). Where no chief-executive title is present, the highest-compensated non-institutional individual is used. Comparisons are therefore made chief-executive-to-chief-executive rather than simply highest-paid-to-highest-paid.

03Exclusions

Two categories are deliberately excluded to prevent distortion — the kind of error a naive lookup makes:

• Related-organization compensation (column E). Amounts paid by related organizations are not added into the benchmark, because the same executive's pay is frequently reported across multiple affiliated filings (especially in health systems), which would double-count it.
• Institutional trustees. Rows where the "person" is an organization (for example, a bank serving as trustee) are excluded, since they do not represent individual executive compensation.

04Peer-set selection

Comparable organizations are matched on three dimensions, consistent with what 26 CFR 53.4958-6 contemplates as "similarly situated":

Sector

Same NTEE classification — first by specific sector code, then, if needed, by major group.

Budget

Total revenue within 0.5x to 2x of the subject organization.

Geography

Same state where a stable in-state set exists; otherwise nationwide.

Because a defensible peer set requires enough organizations for a stable distribution, the criteria broaden in a fixed, documented order. The report always states the exact tier used.

1. Same NTEE sector, same state, within the budget band.
2. Same NTEE sector, nationwide, within the budget band.
3. Same NTEE major group, nationwide, within the budget band.

The qualifying organizations are then narrowed to the closest comparables by budget proximity — a tighter, more defensible "similarly situated" set rather than a large, loosely matched mass.

05Percentiles & assessment

From the peer set's reportable-compensation figures, PeerBasis computes the 10th, 25th, 50th (median), 75th, and 90th percentiles using linear interpolation between ranked values. The subject executive's compensation is located within that distribution as a percentile rank.

Compensation at or below roughly the 90th percentile of comparable organizations is generally presented as within the reasonable range; figures above the 90th percentile are flagged for board review. The board, not PeerBasis, makes the final determination.

06Legal basis: the rebuttable presumption

Under IRC 4958, compensation approved by a tax-exempt organization is presumed reasonable — shifting the burden of proof to the IRS — when three requirements of 26 CFR 53.4958-6 are met:

1. Approval in advance by an authorized body composed of individuals without a conflict of interest.
2. Reliance on appropriate comparability data prior to the determination.
3. Adequate, concurrent documentation of the basis for the determination.

A PeerBasis report supplies the comparability data for the second requirement and provides ready-to-adopt minutes language for the third. Form 990, Part VI, Line 15 asks every filer annually whether it followed such a process for its top officials.

07Limitations

• Geography is state-level. Peers are matched by state with a nationwide fallback — not by metropolitan area or cost of living. Because compensation tracks local cost of living, matching by metro (MSA) is a planned refinement; until then, geography is the most-relaxed of the three criteria.
• Reporting periods vary. Organizations file on different fiscal years; comparables may reflect different twelve-month periods.
• Titles are free text. Roles are reported as free-form text on the 990 and are normalized heuristically.
• Sector coverage. NTEE codes are present for the large majority of full-990 filers but not all; organizations without a code cannot be sector-matched.
• Not advice. A PeerBasis report is comparability data and documentation support. It is not legal or tax advice, and boards should consult their own counsel.

08Provenance & citation

Reports are dated and record the data vintage and the peer-selection tier used, so a determination can be reconstructed. To reference this methodology, cite: "PeerBasis Methodology, Version 1.0," peerbasis.org/methodology.

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