Traps for the Unwary - Loans to Directors and Officers
With increased scrutiny and regulation by Congress and the Internal Revenue Service, it is becoming more important for non-profits to focus on compliance with both federal and state rules. Under Texas law, non-profit corporations are prohibited from making loans to officers, directors, or members. Directors who approve a prohibited loan and officers who participate in making a prohibited loan are jointly and severally liable to the corporation for the total amount of the loan until it is repaid. Even loans to employees and officers that are excepted from this rule can result in penalties under the Internal Revenue Code for impermissible private inurement, excess benefits, or self-dealing.
If you have any questions, please feel free to contact one of the attorneys listed below. You may also view the alert in the PDF linked below.
To ensure compliance with requirements imposed by U.S. Treasury Regulations, Haynes and Boone, LLP informs you that any U.S. tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.
*Board Certified – Estate Planning and Probate Law and Tax Law by the Texas Board of Legal Specialization