04/08/2022

Board Member Contributions:

Can they impact your tax-exempt or public charity status?

We get a lot of questions from our not-for-profit (NFP) clients, and we thought it would be valuable to publish our answers. Reach out to us if you would like to see a question in a future newsletter.

Question:

One of our board members made a significant contribution to our 501c(3) organization. Does this put our tax-exempt status in jeopardy?

Answer: It’s Complicated

While this donation may not impact your tax-exempt status, it could affect your public charity status. Public charities are required to meet the public support test. Think of the public support test as a way to prevent wealthy individuals from funding their own private goals through a public charity. You may wonder why: money is money, right? The short answer is, it’s complicated. In having to solicit funding from the public, public charities are “forced” to appeal to public issues and concerns. This creates checks and balance on the activities and services that these organizations provide.

Please select this link to read the complete article from OSAP Member Clarke Schaefer Hackett.