Compensation packages for executives of tax-exempt organizations can raise private inurement issues and are also subject to tax regulations governing benefits, including nonqualified deferred compensation, that do not apply to taxable employers. It’s a thorny world out there. Tread carefully.
Section 501(c)(3) of the Internal Revenue Code provides that a corporation, trust or association may qualify for exemption as a charitable or educational organization only if, among other things, no part of its net earnings inures to the benefit of any private individual. “Private inurement” can occur when an influential insider (e.g., an executive) gets a benefit or something of value from the organization and does not give fair value in return.
