Too Much? Too Little? Nonprofit Compensation

The IRS is clear that nonprofit executive compensation is one of the top compliance issues. Please see the free CLE below regarding compensation best practices. There is also a rooftop reception afterwards where you can mingle with your colleagues and the panel (which I can personally guaranty is worth the price of admission).

Too Much? Too Little? Nonprofit Compensation

Hosted by

Sponsored by

May 14, 2013
Regional Arts Commission
6128 Delmar

If you serve on a nonprofit board of directors, advise nonprofits, or
have been following this issue in the news, this seminar is for you. Our expert
panel: Keith Kehrer, Bryan Cave LLP; Judy Murphy, RubinBrown LLP; and Kent M.
Rapp, Grant Cooper & Associates, will discuss best practices in determining
reasonable executive compensation, including the benefits of an articulated
compensation philosophy, compensation policies, IRS Form 990 reporting, pay equity
issues, collecting comparable data, severance packages and tips for working
with a search firm.


How Would You React?

How would your board of directors react if it discovered potential wrong doing?  The answer to this question is critical.  Recently, Robert Carlson, the Missouri Assistant Attorney General who oversees charity enforcement in Missouri, indicated that a board’s quick action to address an issue, such as a potential breach of fiduciary duty or misuse of charity assets, may keep the board of directors and/or charity from being sued by the Attorney General’s office.  Such a reaction includes a proper investigation of warning signs.  The IRS has similarly provided that a board’s reaction will be a key factor in determining whether the IRS will seek revocation of exempt status in instances involving private inurement, including whether the board has corrected the current situation (which may include firing and suing the offending party) and put safeguards in place to prevent future problems before the IRS gets involved.   See Treas. Reg. 1.501(c)(3)-1(f).  While it is not possible to prevent all acts of wrongdoing, the manner in which a board reacts when potential wrong-doing is discovered is critical to (i)demonstrate that the board has satisfied its fiduciary duties, (ii) protect the charity and board from potential lawsuit, and (iii) maintain tax-exempt status.


No More Horsing Around

In PLR 201104066, the IRS revoked the tax-exempt status of an organization formed to guard the purity of a certain breed of horses, promote interest therein, and help fund research on the genetics of the breed.  The organization also maintained a website that contained links to private sellers of such horses.  The IRS concluded that the website links caused the organization’s assets to inure to the benefit of private individuals.  The breeders earn a profit, and private benefit, by being able to sell horses and/or stud services to interested persons, and the organization facilitated these sales.  One lesson for other charities is to use caution when linking to for-profit websites.


Seller “Gifts” and Down Payment Assistance Crackdown

The IRS continues to crackdown on down payment assistance programs that involve “gifts” by the selling party.  Under these programs, the organization offers down payment assistance to buyers who cannot afford the 3% down payment necessary to qualify for a federally insured (HUD) loan.  In order to raise the funds, the organization requires participating sellers to agree to donate the 3% down payment to the organization.  Despite the fact that the “donation” by the seller matches the buyer’s 3% down payment (which is transferred to the seller as part of the purchase price), these organizations maintain that the down payment assistance is funded with other donations.  However, these organizations rarely demonstrate funds from any other sources.  In Private Letter Ruling 201102064, released today, the IRS denied tax-exempt status to another organization structured in this manner on the basis that the organization operates with a substantial non-exempt purpose and for the benefit of private interests (including the sellers, and in many cases, real estate brokers).  This is not a new development but merely another ruling in a long line of recent letter rulings scrutinizing down payment assistance programs that operate in this manner.

Powered by WordPress | Published by Bryan Cave LLP | Privacy Policy | Disclaimer | Advertising Notice | Site Map
Home | Our Team | Our Practice | FAQ | Clients | Our Firm | Contact Us | Twitter