One of the worst things that can happen to a not-for-profit organization is to have its tax-exempt status revoked. Among other consequences, the not-for-profit may lose credibility with supporters and the public, and donors will no longer be able to make tax-exempt contributions.

man in a business suit putting a silver coin into a pink porcelain piggy bank, next to stacks of coins, avoiding excess benefit transactions to keep tax-exempt status

Although loss of exempt status isn’t common, certain activities can increase your risk significantly. These include ignoring the IRS’s private benefit and private inurement provisions. Here’s what you need to know to avoid reaping an excess benefit from your organization’s transactions.


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