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The Fundamentals of the Private Benefit Rule
501(c)(3) nonprofit organizations rightfully focus much of their attention on complying with laws involving conflicts of interest among Board members, officers, and management. However, the “private benefit rule” is often overlooked and reaches far beyond an organization’s insiders. A basic understanding of the private benefit rule can help you navigate potential issues in a wide variety of programs and activities.
The Fundamentals of the Unrelated Business Income Tax (UBIT)
Business or “fee-for-service” revenue can be an important source of unrestricted funds for a well-rounded nonprofit organization. However, many organizations are hesitant to engage in commercial activities due to worries about the unrelated business income tax (“UBIT”). A basic understanding of UBIT fundamentals can alleviate these fears and help organizations to make better, more confident decisions about their business activities.
Q&A #156 – Who is considered a family member under nonprofit conflict of interest rules?
Extended family members such as aunts, uncles, and cousins generally fall outside of the technical definition of “family members” under the federal tax code provisions governing conflicts of interest involving 501(c)(3) nonprofit organizations. However, these types of relationships can certainly lead to the perception that there is a conflict and should be treated as such to avoid the risk of damaging your organization’s reputation.
The Wrong Way to Add a Charitable Arm to a For-Profit Business
I often receive inquiries from entrepreneurs who are looking to add a philanthropic component to an existing for-profit business, such as by forming a nonprofit as a charitable arm or subsidiary of their business or starting a corporate foundation. These ideas are usually well-intentioned. However, mixing business and charitable activities too closely can make IRS approval of 501(c)(3) status an uphill battle.