Minneapolis, MN asked in Tax Law for Minnesota

Q: Is it legal for a 501c(3) Director to pay himself a non taxed W2 as a housing allowance?

The sole revenue for the 501c(3) is Consulting Fees from the Directors solely owned Scorp, and it's sole expense is the Directors salary. Is this legal or tax evasion?

Related Topics:
1 Lawyer Answer

A: FYI, it is not unlawful for a 501c3 corporation to own a for profit corporation. However, revenue from any source must be reported to the IRS. The 501c3's gross revenue can be offset by deductions if the deductions are actually related to the charitable (or educational or religious) purpose(s) or reason(s) for the organization's existence.

For example: A charitable 501c3 cannot lawfully offset income by claiming expenses for maintaining a fleet of charter fishing boats in the Bahama islands--unless that activity is directly related to the organization's charitable purposes.

Justia Ask a Lawyer is a forum for consumers to get answers to basic legal questions. Any information sent through Justia Ask a Lawyer is not secure and is done so on a non-confidential basis only.

The use of this website to ask questions or receive answers does not create an attorney–client relationship between you and Justia, or between you and any attorney who receives your information or responds to your questions, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask a Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.

Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.