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 benefit to a third party, but what the IRS is concerned about is excessive private benefits.

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.