As discussed in the previous post of this two-part blog series, it’s a common misconception that those serving on the board of a nonprofit organization cannot be paid for their service whatsoever. However, as clarified in the previous post, this is not true at least under California law as well as under federal law. In addition to state laws governing nonprofit corporations and associations (discussed in the prior blog post), there are IRS rules and guidelines affecting 501(c)(3) nonprofit organizations, which this post will discuss.
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I often hear people say that those serving on the board of directors of a nonprofit organization cannot be paid for their service, however, this is not an accurate depiction of the law of nonprofit corporations, as this and the subsequent blog post will discuss.
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I frequently advise formally structured nonprofit organizations seeking advice on maintaining their 501(c)(3) tax-exempt status as well as informal organizations seeking ways to more formally structure as a nonprofit corporation and to apply for 501(c)(3) status. Both types of organizations sometimes ask me questions about an arrangement commonly known as “fiscal sponsorship” in the nonprofit sector.
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