Non-profit law
Nonprofit Law Developments in Excess Benefit Transactions
Taxes for excess benefit transactions are to deter insiders otherwise known as disqualified persons from using a nonprofit for unreasonable compensation. Recent tax court cases underscore that apart from those named in the law as disqualified persons who were obvious targets—such as directors and certain officers, members of their families, and certain affiliated entities—there may be others who qualify as “disqualified persons.” The question whether an individual is a disqualified person generally “depends upon all relevant facts and circumstances.” The same guidance that goes for nonprofits goes for every legal entity: keep the entity separate. It may be obvious, but you should not use the nonprofit’s funds to buy groceries for the officers or directors or other insiders. You shoul...
Read moreNonprofit Law Developments in Private Inurement
This article discusses recent developments in nonprofit law in private inurement and private benefits. Private inurement issues typically arise in connection with an IRS proceeding seeking to revoke the tax-exempt status of the organization. The IRS will not tolerate even a little private inurement. In short, insiders may not unjustly enrich themselves at the organization’s expense. The other side of the tax-exempt requirement is in the purpose of the organization. Under the private benefit doctrine, an organization is not operated for an exempt purpose unless it serves a public rather than private interest. The IRS recognizes that private benefits to third parties may incidentally arise from the nonprofit’s activities consistent with its proper purpose. Any transaction will result in some benef...
Read moreNonprofit Management: Legal Challenges Galore
I recently came across a nonprofit in which the chairperson, who had recently died, bequeathed her interest in the nonprofit to a close relative. Little did she realize that a nonprofit is not property that you can transfer or otherwise give away. A nonprofit is fundamentally different from a for profit organization, such a corporation which issues stock. This article describes some corporate governance aspects of nonprofits....
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