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12/22/2009

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Ann,

Thanks for the spotlight on the non-profits. We should be thinking outside the compensation box for them, too!

And thanks for two great compensation blogs. They are great forums for fresh thinking.

Merry Christmas to you and your family!

Paul:

Thanks for the comment and the Christmas wishes - my best back to you ... and to all Cafe readers!

Ann, great to have you back, and thanks for touching on some great info for my clients.

All the best for the holidays!

Margaret:

Thanks - glad you found the info helpful. Best to you and yours for the holidays as well!

Check out the technical notes at http://www.nonprofit-compensation.com/index.cfm?TrkID=612-49 which discusses more than you'd ever want to know about Intermediate Sanctions against managers. The harshest constraints against "excess benefit transactions" are on executives and their compensation advisors. It is much less of a problem for sales/marketing types as long as they are not board members or related to them.


Safe harbors exist and are simple to access. IRS TE/GE and Guidestar direct 501(c)3s and 4s to that site for mutually acceptable data for compliant pay practices.

Jim:

Thanks for sharing the link and info here - could you clarify where on that page the technical note is? I tried a few things and didn't seem to come up with what you describe. I think it would be great info for readers.

As I have been made to understand it by legal experts in the field, the issue with sales/marketing types isn't so much the intermediate sanctions against excess benefit transactions - frankly, I think the IRS has done a good job in the area of executive comp here with a number of webinars and articles, many of which I have advertised on Compensation Force.

Rather, I have been informed that it is the possibility of private inurement, which can involve any private individual connected to a charity, whether they are technically a "disqualified person" (per intermediate sanctions law) or not. That is the area where we are in the dark. I don't know if the technical note you reference addresses that or is more focused on the executive compensation issue of excess benefit transactions - but either way, we all welcome the information and resource.

Thanks for sharing here !!

Personal inurement can be searched in the irs.gov site to produce a number of fairly clear references, such as

A section 501(c)(3) organization must not be organized or operated for the benefit of private interests, such as the creator or the creator's family, shareholders of the organization, other designated individuals, or persons controlled directly or indirectly by such private interests. No part of the net earnings of a section 501(c)(3) organization may inure to the benefit of any private shareholder or individual. A private shareholder or individual is a person having a personal and private interest in the activities of the organization.

http://www.irs.gov/irb/2008-18_IRB/ar14.html gives specific examples.

The rather clear Intermediate Sanctions provisions (IRC 4958) deal more with big dollars spend on insiders. Personal inurement is broader but doesn't seem to apply in cases where arms-length bargaining produces competitive results, judging from the examples. However, any charity run for the sole benefit of the employees would seem to be in trouble.

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