Private Inurement and Impermissible Private Benefit

Land trusts, at times, are requested by private parties to act or enter transactions which could potentially benefit those parties or other third parties. The question then arises -- can a charitable organization benefit a private party. To answer, one must look at the rules for private inurement and impermissible private benefit. Private inurement and impermissible private benefit are creations of federal tax law for charitable organizations. Prohibitions on private inurement and impermissible private benefit are designed to ensure that charitable assets are used to further public (or charitable) purposes, not private ends. Violation of private inurement and private benefit rules may result in monetary penalties and, in extreme cases, the loss of the charity’s tax-exempt status. Private inurement and impermissible private benefit may occur in many different forms.