Posts tagged "intermediate sanctions"

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 should not pay unreasonable compensation for the officers. In short, you should not use a nonprofit tax-exempt organization, which is subsidized by US taxpayers, as a personal piggybank for officers, directors, their families, or other insiders.