non profit CPA in Texas

Feb 22 2014


Self-Dealing Transactions

These types of exchanges are known as self-dealing transactions and are subject to excise taxes to be paid by every individual involved in the decision. Every individual aware of the self-dealing transaction, not just the NFP and the board member/property owner is subject to this rule. The tax code states that this board member was a “disqualified person” outside the integrity of the tax-free status afforded the Organization. The rules on “self-dealing transactions” are clearly delineated in Chapters 41 and 42 of the Tax Code.

A “disqualified person” is defined as:

  • Substantial contributor,
  • An owner (>35%) of a company that is a substantial contributor,
  • Nonprofit managers (can include other board members),
  • Family members of the managers and owners of these companies
  • Other foundations controlled or related to the nonprofit.

Get advice from your CPA regarding potential transactions with anyone who can fit the “disqualified person” definition.

What actions have you seen that might fall within these self-dealing transactions? Again, seek consultation when your organization is considering a transaction with a related party (someone connected to the organization.)

The certified public accounting firm of Cox and Associates CPAs has been serving churches and nonprofit organizations since 1996. Our goal is to achieve excellence in the provision of tax, accounting, auditing, financial education, consultation, and other related businesses services to our clients. Call us with your questions at (281) 399-8153.