He is a member of the board of directors and, as the founder of the nonprofit corporation, probably has a lot of influence. Note that Clyde's wife is a disqualified person, and so are his children and grandchildren. The business deal might involve a nonprofit that pays a salary that is too high. Or a nonprofit corporation that pays more than fair market value for supplies or furniture to a disqualified person. Or a nonprofit that pays higher rent than fair rental value and the person receiving the money is a disqualified person.
Any transaction involving a nonprofit is subject to scrutiny.
In our example, the fair market value of Clyde's 30 years of service as a volunteer is zero dollars. Volunteers, by definition, serve without expectation of compensation. With those key concepts in mind, it's a little easier to understand what happened to Clyde. As organization managers, the board of directors of Help the Needy also have a problem. Clearly, these new excess benefit transaction rules present some very serious risks for nonprofit corporations.