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.