Legal Question in Business Law in California

Re: Excessive (or Illegal) Employee Pay for a Small Nonprofit Company?

Pray tell, would your salary happen to be approximately $60,000 a year. I always wonder about questions framed such as yours. Basically the salary of an individual will depend upon numerous things. The test is it reasonable under the circumstances. It is not how the salary is characterized in terms of "property manager" but what are that person's duties and given the total income of the entity is it reasonable. That is the test them whether or not the $5000 per month salary based on a $30,000 gross income per month is reasonable is something that I cannot tell you without having numbers of more facts and my disposal. High percentage salaries are always a red flag but that does not mean they are not lawful and necessary, it depends upon the facts and the proof available. You wish to discuss this with many I've handled numerous nonprofits over my last 30 years at them in the San Francisco Bay Area. 925 -- 945 -- 6000.

Re: Excessive (or Illegal) Employee Pay for a Small Nonprofit Company?

I have trouble dealing with questions when the inquiry comes from someone already not forthcoming with who they are and how they are involved. Reasonable based on duties, etc., etc.

Re: Excessive (or Illegal) Employee Pay for a Small Nonprofit Company?

Even attorneys who represent the nonprofit are cautioned not to give opinions on director or officer compensation unless they are expert in this field.

In general, directors, officers and employees of tax-exempt nonprofit organizations may be compensated, so long as the compensation is reasonable. See IRS Revenue Ruling 73-126 and IRS Regulation 1.162-7(b)(3).

Excessive compensation may result in a finding of private inurement, which would jeopardize the charity's tax-exempt status. See IRS Reg. 1.501(c)(3)-1(d)(1)(ii). Short of loss of tax-exempt status, the IRS can also assess excise taxes against individuals who realize an unfair advantage from their positions with exempt organizations.

There are surveys of compensation levels for directors and officers of charities. While applying averages to a particular nonprofit is not foolproof because of operational differences, this might serve as a general guide for you. Try the Council on Foundations and the American Society of Association Executives.