Here are some answers to question I received at a recent training. Many of the questions in this batch came from folks involved with religious organizations, synagogues and churches.
Why are religious organization tax exempt?
The best answer I have is the First Amendment of the Constitution of the United States which states, “Congress shall make no law respecting an establishment of religion, nor prohibiting the free exercise thereof.” Taxing a religious organization might interfere with the free exercise of religion. For the IRS take on churches and religious organization exemptions please read this.
Is a board member protected from legal action if it relies on outside advice?
If the board member is not paid and is acting in good faith they are most likely protected if they are involved in making what turn out to be bad decisions, even decisions that result in harm to the nonprofit. More protection may be had in the organization Directors and Officers Liability insurance policies. A great source of info on this topic is here, and for an organization that specializes in nonprofit insurances click here.
