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Donating to nonprofits involves routine questions, but overlooking private inurement can lead to serious consequences. By steering clear of private inurement, nonprofits uphold integrity, protecting tax status and make a lasting impact.
When making a donation to an organization, there are many questions that a non-profit will begin to ask. “How much money are you looking to donate? Does any family work or benefit at that business? What is your mailing address?” Now these may seem like everyday questions, but a person in the nonprofit space can tell you that nonprofit organizations have many regulations and reporting requirements. Since the establishment of philanthropic activity, charities have also been warned of the dangers of private inurement. While it may seem trivial, private inurement can have far-reaching consequences, and should be avoided.
Why you Should be Avoiding Private Inurement
Avoiding private inurement may uphold the integrity and credibility of the nonprofit organization. This demonstrates the commitment to their community and their charitable mission. When a nonprofit organization engages in private inurement, it creates a strain on the trust that the organization can provide their supporters and donors. This can lead to less frequent donations, undermining the organization to carry out the charitable mission.
Private inurement also places the nonprofit organization in the position of losing nonprofit status. The rules and regulations in place for nonprofit organizations are in order to maintain tax-exempt status with the IRS. Failure to comply with these rules can induce severe consequences, such as financial penalties, damage to the organization’s reputation with the IRS, and loss of tax-exempt status.
Additionally, private inurement can also cause several complications within the internal process of the nonprofit organization. Not only is the trust of donors and supporters lost, but as is the trust from those engaging and working toward the charitable mission internally. In order to achieve a nonprofit’s charitable initiatives, people and resources are necessary. Therefore to succeed, there must be an effective allocation of resources and persons to direct them correctly. By doing so, nonprofit organizations avoid private inurement, and properly direct resources.
Importance
The importance of avoiding private inurement cannot be overstated. Nonprofit organizations have a fundamental responsibility to serve the public good, and private inurement contradicts this purpose. By upholding the highest standards of integrity and transparency, nonprofits can maintain public trust, sustain their tax-exempt status, and effectively allocate resources, ultimately making a lasting difference in the lives of those they serve.
This article has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transactions.