January 9, 2010
A tax-exempt business league asked the IRS to rule that compensation paid by it to one of its board members would not constitute private inurement. This individual is the association’s educational director, who develops educational courses for the organization and is an instructor. His compensation is in the form of book royalties and compensation for operation of a hotline for the benefit of the association’s members.
The organization represented to the IRS that this compensation is determined on the basis of “market comparables obtained from available like-kind organizations” and the Bureau of Labor Statistics. The compensation is considered reasonable by the association’s board of directors.
The IRS ruled that an individual may provide services to a tax-exempt organization and be compensated. It “does not matter” whether the recipient of the compensation is a trustee, director, officer, or founder, wrote the IRS, as long as the compensation is reasonable. Private Letter Ruling 200944055
Source: Nonprofit Counsel, January 2010
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