Fried & Davis - Private Inurement and Compensation

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What the heck is "private inurement"?

Private inurement is a term used to describe means of transferring some or all of an organization's resources to persons in the private capacity. Private inurement involves transactions with insiders of the organization.

What happens if a nonprofit engages in private inurement transactions?

The organization loses its ability to be categorized as tax exempt under federal income tax law.

What types of transactions constitute private inurement?

Transactions that constitute private inurement include excessive compensation, unreasonable borrowing arrangements and unreasonable rental arrangements.

When is compensation private inurement?

Compensation is private inurement when it is paid to an insider and it is unreasonable and excessive.

Can nonprofits give bonuses to employees?

Sure, so long as the bonus is reasonable.