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Nonprofit Law/Allowable Expenses reimbursed for non profit 501c3 organizations.


My main concern is expense reimbursement to board members for items such as auto expense and phone charges. I have searched the Internet for these answers and to be honest all I get is a bunch of B.S. from IRS web sites about 501c3's and not one document that spells out in black and white what is allowed and what is not allowed.  Can you please tell me in plain English  Can a member put in an expense request to be reimbursed for phone use and how much of his phone bill can be reimbursed. Is it 10%,20%  More or less or none. Or is it only for calls directly related to the running of the orginization various programs.

The IRS rule for what nonprofits may spend money on is similar to
the standard that the IRS uses when determining what is a valid
business expense for an ordinary business. For example, at the IRS refers
extensively to the regular business expense rules and applies them
to 501(c)(3) organizations. On page 32 we see "Reimbursements are
technically covered by Regs. 1.62-2.  However, for administrative
purposes, all TE/GE [Tax Exempt & Government Entities Division]
administrative personnel will treat reimbursements of a business
expense the same as if the expense were paid directly by the
employer, as long as the employee complies with the substantiation
See also: "Business Expenses"
on page 3, under "What Can I Deduct":
--start of excerpt  ---
To be deductible, a business expense must be
both ordinary and necessary. An ordinary ex-
pense is one that is common and accepted in
your industry. A necessary expense is one that
is helpful and appropriate for your trade or busi-
ness. An expense does not have to be indispen-
sable to be considered necessary.
--end of excerpt  ---

See page 41 of IRS Publication 535 at starting in the first
column under the heading "Accountable Plans" which the organization
must have.  That section is written for employees but also applies
to volunteers.
See the section under "Volunteer Officers/Workers" at

Specifically, as to phone bills, see the first column of page 47 in that Publication 535:
--- Start of excerpt ---
Telephone.  You cannot deduct the cost of
basic  local  telephone  service  (including  any
taxes)  for  the  first  telephone  line  you  have  in
your  home,  even  if  you  have  an  office  in  your
home. However, charges for business long­ dis­
tance  phone  calls  on  that  line,  as  well  as  the
cost  of  a  second  line  into  your  home  used  ex­
clusively  for  business,  are  deductible  business
--- End of excerpt ---
Therefore, the board members may be reimbursed for the long distance phone calls on their "line" when the calls were for the business of the organization.

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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