Q&A #115 – Are nonprofit Board members required to be U.S. residents?
Question: I am in the process of forming a nonprofit organization that will be applying for 501(c)(3) status. The organization’s mission will involve charitable activities in a foreign country, and some of the individuals interested in joining the organization’s Board of Directors are neither U.S. citizens nor U.S. residents. Is this permitted?
Answer: There is no requirement under the federal tax laws governing United States 501(c)(3) and other tax-exempt organizations that Board members be U.S. residents or U.S. citizens. Similarly, I am not aware of any state nonprofit corporation statute that imposes such a requirement. However, since the organization will be based in the U.S., it would be prudent to have at least some Board members and officers who maintain a permanent residence in the U.S. to deal with operational and compliance matters.
There are potentially special considerations if your organization will have a close fundraising or grant-making relationship with a particular foreign charity or non-governmental organization. In these cases, it is usually helpful to show that a majority of the Board are U.S. persons to help demonstrate that the U.S. organization is independent from the foreign organization (this is important for purposes of ensuring that donations to the U.S. organization are eligible for the charitable deduction).
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Additionally, it may be advisable to consult an immigration law attorney or an attorney based in Board member’s country of residence before engaging in certain financial transactions with a foreign Board member (such as a compensation or fundraising arrangement).
Planning Tip – For practical reasons, it is preferable that U.S. nonprofits with foreign Board members to have at least one or two U.S. residents serve as the organization’s officers with signature authority over the organization’s bank account. Banking practices have become more stringent and complicated in recent years, and it has become increasingly challenging to open a bank account and deal with day-to-day banking functions if the organization does not have U.S. officers available to interact with the bank representative and provide the organization with a legitimate U.S. street address.
Nonetheless, in general a U.S. tax-exempt, nonprofit organization is permitted to have foreign persons on its Board of Directors.
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