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Nonprofit Law/Charity - Director remuneration


Can directors of Charities receive remuneration for there service as directors?  Is this law the same in all states?  Can directors also serve other paid roles in the organization?

Thanks,and thank you for your time and expertise.


You wrote that your location was Quebec, Canada.  Are you inquiring about Canadian organizations?  You asked about "states" so I am assuming you are asking about the United States.  Therefore, I will answer as to the United States.  I do not practice the law of Canada, so I would not be answering any question relating to that law.

The IRS allows directors to receive remuneration for their services as directors of 501(c)(3) organizations, whether they are charitable, religious or educational organizations.   The compensation may not be more than what is  reasonable. Starting on pdf page 10 of the IRS discusses many of the factors it would look at to decide whether a salary is reasonable.

The first factor is how many hours weekly the person is working for the 501(c)(3) organization and then what the normal salary would be for someone who is qualified for such a job in that area of the country. "It is, in general, just to assume that reasonable and true compensation is only such amount as would ordinarily be paid for like services by like enterprises under like circumstances." Reg. 1.162-7(b,(3)

I know of no state that prohibits a nonprofit organization from giving remuneration to their directors.  Some states, though, may limit the number of directors who do receive compensation so that a majority of the directors are not receiving any compensation for their services as directors, but, off the top of my head, I do not know which, if any, of the states still have such provisions in their code.

Directors may service in other paid roles in the organization, but in some states, there is a limit to how many are in such paid roles. For example, Section 5227 of the California Corporations Code
provides that:
--- Start of Excerpt ---
Not more than 49 percent of the persons serving on the board of any corporation may be interested persons.... For the purpose of this section, "interested persons" means either: Any person currently
being compensated by the corporation for services rendered to it within the previous 12 months, whether as a full or part-time employee, independent contractor, or otherwise, excluding any reasonable compensation paid to a director as director."

Harvey Mechanic
Attorney at Law

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.  

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Harvey Mechanic


DO NOT GIVE ME INFORMATION THAT YOU WANT KEPT CONFIDENTIAL. I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "" without the quotes and then add your search terms before hitting enter.


I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.


B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.

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