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Nonprofit Law/Private Interest Donations


May a 501c3 provide benefits to one individual that are inordinately more valuable than the benefits provided to others in the same class that they are committed to serve?  For instance, can they build a house for one individual (which would represent more than half of the total annual program expenses) while providing benefits of lesser value to others?  The chosen individual also has family members on the board.

A 501(c)(3) organization is supposed to serve the public and not, to any substantial degree, private groups that are related to the organization's insiders.  Internal Revenue Code section 501(c)(3) which is available at (on page 2, first column) provides, in part, that the 501(c)(3) organization must be one of "Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable ...or educational purposes ... no part of the net earnings of which inures to the benefit of any private shareholder or individual".

See pdf page 13 of under the heading
"Charitable Class"
--start of excerpt  ---
The group of individuals that may properly receive
assistance from a charitable organization is called a charitable
class. A charitable class must be large or sufficiently indefinite
enough that the community as a whole, rather than a pre-selected
group of people, benefits when a charity provides assistance.
--end of excerpt  ---
More details are found starting at pdf page 6 of

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. For me to consider your individual situation and how the law applies, I would need to gather more information.  

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Harvey Mechanic


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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