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How should we deal with $100 for virtual board dinner?

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How should we deal with $100 for virtual board dinner?

I am the finance person for a nonprofit organization. With most meetings now being virtual, the board asked if we could have dinner paid for at our next virtual meeting. The President agreed and we sent each director $100 for dinner. Only three, so far as I know, used the money to actually purchase something for the meeting. Even though we are not intending to reimburse the members, I asked for receipts for my own documentation to justify the $100.  Was I wrong for asking for them? I also felt this will help with doing our next year’s budget.

This is one of those questions for which you probably don’t really want an answer. 

Free meals for the directors at their regular board meetings are not usually considered compensation and are such a de minimis benefit that the IRS normally doesn’t worry about them.  (Some organizations ask the directors to pay for their meals so as not to reduce the funds available for mission.)  But paying for a virtual meal, where people can eat and drink what and when they wish, doesn’t seem to be quite the same thing. 

If you are a 501(c)(3) or (c)(4) organization and were treating it as reimbursement of their meal expense, the IRS might treat this as an “automatic excess benefit” because it is not being paid under an “accountable plan” for reimbursement of expenses.  (See Ready Reference Page: “IRS Issues Tips to Agents on Collecting ‘Automatic’ Excess Benefits from Nonprofits”) You avoid the excess benefit tax issue by treating it as compensation when given.  That seems to be more likely what it is in this case, especially since you think most people did not use any of it for the meal.

Fortunately, it is small enough that you don’t have to file 1099s for everybody or move your directors out of volunteer status under the federal Volunteer Protection Act.  You will have to report it as director compensation on your Form 990 tax information return, but I suspect that most directors won’t remember it when it becomes time to file their personal tax returns next year.  Some, when they know what you intend to do, might give the money back.  Hopefully we won’t be holding so many virtual board meetings in a few months, but, even if we are, I suspect that you won’t be budgeting for this type of expense next year.

Tuesday, March 16, 2021

Comments

Wow, $100 for dinner?

Seems like a bad idea. Costs the organization funds for the benefit of the people who are supposed to provide funds or help raise funds. Creates a reporting nightmare for everybody. Let it go.

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