Nonprofit Board Members & Managers – Are you aware of the Federal Intermediate Sanctions Act?

Nonprofit Board Members  & Managers – Are you aware of the Federal Intermediate Sanctions Act?

 

I have been surprised by the number of people, holding nonprofit board and management positions, who are totally unaware of this piece of legislation. (IRS Code – Section 4958)

The act applies to nonprofit organizations.  As I understand it, the act states that any volunteer, manager, or volunteer director who receives an excess benefit, is liable to be billed by the IRS for a personal excise tax based on the excess benefit received [i] .  That means, for example, if a nonprofit sells land with an appraised market value of $100K to a volunteer for $75K, the IRS could levy personal excise taxes on the directors and managers who approved the excess benefit transaction.[ii]

CEO ALERT:  Make certain that you, your managers and all board members understand the potential personal liability issues involved with the act.  If necessary, have legal counsel make a presentation.  

[i] I am not an attorney. 

[ii] For more information see: the third (2011) edition of  “Policy vs. Paper Clips,” pp. 90-91, available on Amazon.com   Eugene Fram & Elaine Spaull, (2001), “Expectations for Nonprofit Boards Are Changing,” Nonprofit World, May-June, pp. 14-17

 

 

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