{"id":1705,"date":"2021-10-07T12:58:00","date_gmt":"2021-10-07T17:58:00","guid":{"rendered":"https:\/\/nonprofit-ninjas.com\/?p=1705"},"modified":"2021-10-27T08:12:57","modified_gmt":"2021-10-27T13:12:57","slug":"what-are-unqualified-individuals","status":"publish","type":"post","link":"https:\/\/nonprofit-ninjas.com\/index.php\/2021\/10\/07\/what-are-unqualified-individuals\/","title":{"rendered":"What are Unqualified Individuals?"},"content":{"rendered":"\t\t
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Are the Board Members Qualified?<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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The IRS is pretty clear about individuals they’d like to see – and not see…serving on your nonprofit organization. They don’t need to be rocket scientists, have a degree, or be a genius, but they should be qualified to advise the board on the purposes for which the board was organized.<\/p>

They also should be involved in the management of the board and advise the organization staff on day-to-day operations. That’s not to say they should be running the organization – but advising the staff who do run the organization, and being materially-involved, is important. If they don’t know what’s up, how can they serve and advise on your board?<\/p>

Additionally, the IRS has specified those individuals they do NOT want to see serving on a nonprofit organization’s board of directors, and those individuals are called “disqualified individuals.”<\/p>

Based on the IRS, their specifications are as follows:<\/b><\/p>

“A Disqualified individual, for purposes of the requirements regarding composition of the gov\u00aderning body and officers of an exempt operating foundation, means any of the following:<\/p>

I.\u00a0 A substantial contributor,
II. An owner of more than 20 percent of–
\u00a0 \u00a0 a. The total combined voting power of a corporation,
\u00a0 \u00a0 b. The profits interest of a partnership, or
\u00a0 \u00a0 c. The beneficial interest of a trust or unin\u00adcorporated enterprise, which is a substantial contributor to the foundation, or a member of the family of any individual described in (1) or (2).<\/p>

Indirect ownership of stock in a corporation, profits interest in a partnership, or beneficial interest in a trust or unincorporated enterprise is taken into account for determining a disqualified individual under (2) above, according to the rules explained under Attribution of ownership.”<\/p>

So if someone wants to contribute a large sum of money to your organization – they should NOT serve on your board, because they would have the ability to leverage too much influence on voting and on the other members of the board.<\/p>

The IRS doesn’t say BOD officers and members cannot contribute – they can – but just not more than 20% of a, b, and c above.<\/p>

Also – if one has an interest in a corporation of “for profit” company that contributes to the nonprofit, tax-exempt corporation, then that person would also be able to use undue influence on other members of the board, and they should not serve on the board of directors.<\/p>

If you need help in determining who can serve on your nonprofit board of directors, feel free to email for additional information @\u00a0Nonprofit Ninjas<\/a>.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t

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Other FAQs<\/h5>