What is inurement?

Inurement refers to a situation when a nonprofit organization benefits or transfers its resources to individuals or private entities instead of using them for its charitable purposes. Inurement is strictly prohibited by the IRS under the tax-exempt status because it goes against the purpose of charitable organizations to benefit the public. Examples of inurement include excessive compensation paid to executives, personal use of nonprofit assets, and sharing profits or assets with private individuals or other entities. Nonprofit organizations found to be engaging in inurement may face losing their tax-exempt status, fines, and other legal consequences.