Can A Nonprofit Pay A Board Member For A Specific Service

Many of us serve as volunteer board members of a charitable nonprofit system. But some nonprofit board members get paid for their service. There are potent feelings nearly the propriety of compensating nonprofit board members that are worth exploring before arriving at any conclusions.

The Law

Federal revenue enhancement laws applicable to public charities practice non prohibit reasonable bounty to board members. Federal tax laws applicable to individual foundations too exercise not prohibit reasonable compensation to board members, just this is subject field to the prohibition against self-dealing. Additionally, the very express protection offered by the Federal Volunteer Protection Act would not use to compensated board members.

Land laws may limit compensation paid to board members. For example, no more than than 49 percent of the board members may be compensated or related to someone compensated past a California nonprofit public benefit corporation, but this prohibition excludes any reasonable compensation paid to a lath member as a board member. This ways that a California nonprofit public do good corporation tin can pay all of its board members for serving as board members, but can only pay a minority of its board members for other types of services. State laws may also provide certain immunity protection to volunteer nonprofit board members that may not employ to a compensated lath member.

Some Old Guidance

In the original published draft of the IRS publication Governance and Related Topics – 501(c)(3) Organizations (2008), the IRS provided:

Charities should mostly not compensate persons for service on the board of directors except to reimburse directly expenses of such service.
Run across https://world wide web.icnl.org/resource/research/ijnl/good-governance-practices-for-501c3-organizations-should-the-irs-become-further-involved-2.

This provision appears to have been removed from the publication, which is otherwise still available at the link referenced above. We'll discuss reimbursement of expenses in a futurity post.

Why Nonprofits Should Not Compensate Lath Members

It's a widely held custom for public charities not to pay board members.
Stakeholder trust and confidence may diminish if a nonprofit'south board members are compensated.
- May adversely bear on fundraising and public relations.
- May adversely bear upon board's human relationship with the nonprofit'southward executive and employees.
- May increase public, media, and regulatory body scrutiny.
Volunteer board members are less likely to make decisions based on cocky-interest.
Volunteer lath members accept certain statutory liability protections.
Certain individuals who would be willing to serve as volunteer board members may not be interested in serving on a compensated board (partly because of how they might exist publicly perceived and partly because of the other complexities created by this arrangement).

Why Some Nonprofits Should Compensate Lath Members

Nonprofit board members have considerable responsibilities and to properly meet their fiduciary duties may be very demanding of their time.
- Recruiting and retaining diligent board members may be enhanced by the offer of compensation.
- Compensating lath members may encourage greater diligence on their office (in terms of attendance and observance of their duties).
Compensation may open up the pool of strong candidates for the lath past attracting persons who may not otherwise take financial or other resources to serve (this can too exist a style to increase diversity and inclusion).

Additional BIPOC Considerations

As many nonprofits go through their Wake to Woke to Work journey, there has been more attention on recruiting more than racially diverse board members and creating and modifying policies and practices to build more inclusion and equity throughout the organization. Non surprisingly, because BIPOC board members are mostly better situated, through history and lived experiences, to create and modify such policies and practices, and their input is essential to the process, they can easily end upward having greater responsibilities than White board members. This inequity has led some people to question whether there may be cases in which BIPOC lath members of nonprofits should get compensated for bearing such greater responsibleness and being subject field to greater demands on their time and their mental, emotional, and spiritual health (this work is not like shooting fish in a barrel).

Almost two years agone, I had a discussion on this topic with some of the leaders of the Nonprofit Association of Oregon who had already been collecting comments from the field. I promised to follow up after having discussion with several other nonprofit leaders and governance experts, a majority of whom were Blackness. But there were strong and conflicting opinions on this event, and as I went through my learning journeying, which is far from over, I believed the thing to exist overly nuanced to offer much helpful guidance. All the same, I share some thoughts here in hopes that others will likewise pick up and accelerate the thinking on this outcome.

The law would generally prohibit, within i organization, paying some board members for serving as board members and not others, based on their race. This could enhance Championship VII, Section 1981, and country civil rights law bug.
The police may generally allow for a public charity to pay some, simply not all, board members, for services offered other than as a lath fellow member, including, for example, for serving on a chore force charged with creating and modifying policies and practices to build more than inclusion and disinterestedness throughout the organization ("disinterestedness task force").
- If paying equity task force members for their services, the public charity should enter into a written contract with each chore forcefulness member, memorializing that these services are separate from any service they may provide as a lath member and that the payments were determined to be reasonable equally to the clemency. While this presumes that the task force members will be independent contractors, information technology should exist preceded by an assay of proper employee-independent contractor classification.
- If a private foundation wants to pay some, but not all board members, for such services, the private foundation should outset analyze whether such relationships will be violations of the self-dealing laws or fall within the personal services exception.
Bold that any or all BIPOC board members want to serve on the equity task force is absolutely wrong.
Offering to compensate a BIPOC lath member or candidate and not all board members may exist viewed past the BIPOC board member or candidate as highly insulting.
Not offering or, in some cases, agreeing, to recoup a BIPOC board member or candidate expected to have more work and responsibility than other board members may be viewed past the BIPOC lath fellow member or candidate equally unfair and inequitable (notation that many volition say that a BIPOC board member may have a greater brunt than other board members even if they are not on an equity job forcefulness, especially on a board lacking racial diversity, but compensating for this reason alone may run afoul of civil rights laws).
Requiring that compensated disinterestedness chore strength members be BIPOC individuals may be a violation of civil rights laws.
The equity task strength must exist sufficiently supported by the board and the organization with resources and meaningful say-so.