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Excess Benefit

A charitable organization is permitted to pay a reasonable salary to any employees on staff, as well as reasonable fees for actions performed by board members.  Besides this sort of compensation, it is not permitted to distribute the organization's revenue to any members or leadership of your organization, nor any private persons.  Section 501(c)(3) organizations are public charities - and exist to benefit the segment of the public they have targeted.

Certain activities and decisions that go beyond the allowable exempt activities can lead to intermediate sanctions upon an organization.  "Intermediate sanctions" are a middle tier of repercussions that the government might impose upon a charity when it engages in prohibited activities.  It usually consists of fines upon the organization and sometime directors, which simultaneously serve as a punishment and warning.  This alternative is seen as more desirable reable than losing tax exemption altogether.