Avoid excess benefit transactions and keep your exempt status - Crawford Ellenbogen

Certain activities can increase a not-for-profit’s risk of losing its tax-exempt status. These include ignoring the IRS’s private benefit and private inurement provisions. A private benefit is any payment made by a nonprofit that’s beyond reasonable compensation for the services provided or goods sold or for services or products that don’t further your tax-exempt purpose. If any net earnings inure to the benefit of an individual, the IRS won’t view your nonprofit as operating primarily to further its tax-exempt purpose. However, the rules don’t prohibit all payments. Paying “reasonable” salaries to insiders is generally fine. For more information, please contact us.