Form 1023 - Part V​

​As described on this page, the information below refers to an earlier version of Form 1023.

Pages 2 through 5 - Part V - Compensation of Board & Others

Page 2 - Part V - Question 1a - Officers/Directors/Trustees
There is no law or regulation setting a minimum number of board members for a 501(c)(3) organization, but the IRS must be convinced that your board will have public interests at heart, rather than private interests. The unspoken IRS rule of thumb seems be at least three unrelated people on the board of a 501(c)(3) organization.

Page 3 - Part V - Questions 1b and 1c - Employees and Independent Contractors Receiving More Than $50,000 per year.
If your organization can afford to pay employees and/or independent contractors more than $50,000, it may be penny wise and pound foolish to use a free public service website to prepare your 501(c)(3) application.

Page 3 - Part V - Question 2 - Family and Business Relationships
If you have related individuals on the board, such as a husband and wife, the related persons should hold less than half the voting power. For example, with two related people, you would need at least three additional, unrelated, people on the board, making it possible for the husband and wife team to be outvoted. The IRS is not shy about asking groups to expand their boards if they feel it is necessary.

Pages 3 and 4 - Part V - Questions 4 and 5 - Best Practices
The IRS has kindly made it clear what provisions they would like 501(c)(3) organizations to adopt.

Page 4 - Part V - Question 6 - Non-fixed Payments
"...the use of a method of compensation based upon a percentage of the income of an exempt organization can constitute inurement of net earnings...[which can]...destroy the organization's exemption under section 501(c)(3) of the Code."

Any organization using or planning to use non-fixed methods of payment should seek professional help for both the compensation arrangements and preparation of the 501(c)(3) application.

Pages 4 and 5 - Part V - Questions 7 through 9 - Insider Goods, Services, Leases, Contracts, and Loans
Additional questions designed to reveal certain types of possibly abusive insider transactions.

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