IRS Definition of Board of Directors

The IRS definition of a board of directors is important for fundraising purposes.

Attaining 501(c)(3) status as a nonprofit organization can be difficult. One important aspect of this status is the presence of an overseeing body; for most organizations, this body takes the form of a board of directors, or board of trustees. The Internal Revenue Service, which will review a charity's financial activities, gives guidelines for this board.

Definition

The IRS defines a charity's board of directors as its governing body, remarking that it must contain "persons who are informed and active in overseeing a charity's operations and finances."

Considerations

The IRS recommends that the board select members for their interest and knowledge, with the charity's future needs in mind.

Size

The IRS "Good Governance Practices" leaflet recommends that a charity consider the board's size to ensure it runs effectively; the IRS warns against boards of directors that are too small or too large.

Policies

In general, the Internal Revenue Code does not mandate specific policies, but the IRS does review organizations' applications with policies regarding certain issues--like executive compensation and conflicts of interest--in mind.

References

• Internal Revenue Service: Good Governance Practices
• Internal Revenue Service: Governance of Charitable Organizations