Nonprofit Accounting Basics

Board Member Compensation

There is no federal law that prohibits nonprofits from compensating their board members but some states may forbid compensation for board service. It is a common practice to consider board service a volunteer service. Most boards do not provide regular compensation for their members.

If a board decides to allow compensation for its members, it needs to proceed carefully in order not to betray the public trust. Board members are not expected to benefit personally from their affiliation with the organization but, at the same time, they should not suffer financially from their service.

The IRS considers ‘reasonable’ compensation acceptable. What is reasonable is not clearly defined but following IRS’ safe harbor mechanisms can protect the board from stepping out of line:<

  • Rely on outside counseling
  • Research practices in similar local organizations
  • Document the findings