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Should we have lease for property?

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Should we have lease for property?

The 501(c)(3) organization that my husband and I founded operates from a building on our property. The board wishes to set up a written lease for the portion of the property the organization uses. They want to make sure that if and when we sell the property any monies that have been donated for improvements will be donated back to the organization. Do you know if this is legal and/or possible?

It is an excellent idea.  In fact, without it, you may be receiving an improper private benefit if charitable money is being used to pay for improvements to property that you own.  The lease should be longer than the estimated life of the improvements, and should provide that if the lease is terminated before the improvements are fully depreciated, you will pay the organization the undepreciated value of the improvements.  You should also be sure that the rental is at fair market value or less or you will have an excess benefit. (See Ready Reference Page:  “Charities Must Avoid Excess Benefit Transactions.”

Friday, April 29, 2011

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