Board Duties, Conflicts of Interest and Pay

Boards of small advocacy groups are usually made of people who joined to work on the cause. They came for the water rights fight or the library levy, not for a lecture on fiduciary duty. Then a director's cousin bids on the printing, the executive director asks for a raise, a grant check arrives with strings attached, and the board finds out it is the legal owner of every decision the group makes. This lesson covers what Idaho and federal law expect at those moments. The articles and bylaws set the board up (lesson 2 and lesson 3); this lesson is about how the board behaves once it exists.

Who is in charge under Idaho law

The Idaho Nonprofit Corporation Act, Title 30, Chapter 30, has been the governing law for Idaho nonprofit corporations since its 2015 rewrite. Its board sections are short and mostly default rules a group can adjust in its articles or bylaws.

• The board runs the corporation. Section 30-30-601 says every corporation must have a board, and all corporate powers are exercised by or under its authority, unless the articles hand some powers to another person, who then takes on the directors' duties to that extent.
• At least three directors. Section 30-30-603 requires a board of three or more individuals, except that a religious corporation may have one. Directors must be individuals (30-30-602), not organizations.
• Officers. Unless the articles or bylaws say otherwise, section 30-30-621 calls for a president, a secretary and a treasurer. Two or more offices may be held by one person, except president and secretary (religious corporations excepted). One officer must be assigned to keep minutes and authenticate records.
• Directors may be paid. Section 30-30-611 lets the board set directors' compensation unless the articles or bylaws say otherwise. As shown below, paying directors has a cost under the immunity statute.

Officers carry their own standard. Section 30-30-623 requires an officer with discretionary authority to act in good faith, with the care of an ordinarily prudent person in a like position, and in a manner the officer reasonably believes is in the best interests of the corporation and its members. The board may remove any officer at any time, with or without cause (30-30-624). Officers do what the bylaws or a board resolution say they do (30-30-622), which is a good reason to write the treasurer's job down.

Members, if the group has them, have a check on the board. Under section 30-30-411, members with 5 percent or more of the voting power, or 50 members, whichever is less, or any director, may bring a suit in the corporation's name to make the board act. The complaint must describe the demand made on the board first.

The three duties

The Attorney General's July 2026 manual, Service on an Idaho Nonprofit Board of Directors, organizes a director's job around three duties: care, loyalty and obedience. Only the first is spelled out in those words in Title 30. The others come from general fiduciary law, the Attorney General's supervision of charitable assets and the tax code. Together they are what a regulator, a court or a reporter will measure a board against.

Care. Section 30-30-618 says a director shall act in good faith, "with the care an ordinarily prudent person in a like position would exercise under similar circumstances," and in a manner the director reasonably believes is in the corporation's best interests. A director may rely on reports from officers and employees the director reasonably believes are competent, on accountants and other professionals within their expertise, and on board committees, but not if the director knows something that makes the reliance unwarranted. A director who meets the standard "is not liable to the corporation, any member, or any other person" for board action or inaction. The Attorney General's manual translates this into habits: attend meetings, read the reports, ask when a number does not make sense, and respond to warnings of theft or mismanagement.

Loyalty. The manual describes "undivided allegiance" to the organization: no personal gain from board information, no sharing confidential board business, and decisions that serve the public purpose, not a director's family or business. It does not forbid doing business with a director. It asks that such deals be disclosed, scrutinized and approved by people without a stake. That is what section 30-30-619 provides, below.

Obedience. The manual describes this as keeping the charity on its mission, inside its articles and bylaws, consistent with its tax-exempt status, and lawful in how it uses its funds. For an advocacy group the hard cases are mission drift (the clean-water charity that starts endorsing candidates) and restricted gifts used for general bills. Federal law makes obedience concrete: a (c)(3) that intervenes in a campaign risks its exemption, and an Idaho group that spends a gift contrary to its terms risks a suit under the Charitable Assets Protection Act.

One wrinkle in the Idaho statute: section 30-30-618(5) says a director "shall not be deemed to be a trustee" with respect to the corporation or its property, including property subject to donor restrictions. That limits trust-law liability for directors personally. It does not free the assets. The Attorney General's manual still describes charitable assets as held "in trust" for the mission, and the Charitable Assets Protection Act makes it unlawful to knowingly use them against their charitable purpose or a gift restriction.

Duty	Where it comes from	What it looks like in practice	Warning signs
Care	Idaho Code 30-30-618; AG manual	Reading financials before meetings, asking questions, approving the budget, following up on audit findings	No financial reports for months; one person controls the bank account and the books
Loyalty	Idaho Code 30-30-619 and 30-30-620; IRC 4958; AG manual	Written conflict policy, annual disclosure forms, interested directors leaving the room	Contracts with insiders nobody voted on; loans to officers; pay set by the person paid
Obedience	Articles and bylaws; IRC 501(c); Idaho Charitable Assets Protection Act; AG manual	Checking new programs against the purpose clause; tracking restricted gifts; staying inside lobbying and campaign limits	Restricted money in the general fund; activities the articles do not cover; campaign work by a (c)(3)

Conflicts of interest under Idaho law

Idaho Code 30-30-619 defines a conflict of interest transaction as a transaction with the corporation in which a director has a direct or indirect interest. A director has an indirect interest when another entity in which the director has a material interest, or is a general partner, is a party, or when another entity of which the director is a director, officer or trustee is a party. So a director who sits on the board of the nonprofit that wants to sublease your office has an indirect interest, even with no money at stake personally.

The statute does not ban these deals. It says a conflict of interest transaction is not voidable, and is not a basis for holding the director liable, if it was fair when made or if it was approved this way:

• the material facts of the deal and the director's interest were disclosed to or known by the board or a board committee, and the board or committee authorized, approved or ratified it; or
• the same facts were disclosed to or known by the members, and the members approved it.

Board approval takes the affirmative vote of a majority of the directors on the board or committee who have no direct or indirect interest. If a majority of the disinterested directors vote for it, that is a quorum for this purpose, and an interested director's presence or vote does not spoil an approval that otherwise meets the test. For a member vote, votes cast by or controlled by the interested director, or by an entity in which the director has a material interest, do not count. The articles, bylaws or a board resolution may add stricter requirements (30-30-619(6)).

The Attorney General's manual goes further than the statute. It recommends a written conflict policy that requires disclosure, withdrawal from discussion and abstention from the vote, and suggests that a transaction benefiting one board member go forward only with a super-majority of the board. It points boards to the IRS's sample policy, which is Appendix A of the Form 1023 instructions.

Section 30-30-620 adds a flat rule for one kind of deal. A corporation may not lend money to or guarantee the obligation of a director or officer, except under loan or guarantee programs available to all members. A loan made in violation is still owed by the borrower. And the volunteer immunity statute, 6-1605(1)(f), withholds immunity for violations of the old loan section of the prior nonprofit act, which shows how seriously the Legislature has treated insider loans.

Pay, perks and the federal excess benefit rules

A tax-exempt group may pay reasonable salaries. What it may not do is let its earnings benefit insiders. For most of the tax code's history the only penalty for that was revoking the exemption, which punished the charity's beneficiaries for the insiders' conduct. In 1996 Congress added intermediate sanctions in IRC 4958, which tax the insider instead.

Section 4958 applies to "applicable tax-exempt organizations": 501(c)(3) public charities, 501(c)(4) social welfare groups and 501(c)(29) health insurance issuers, and groups that were any of those in the prior five years. It does not apply to private foundations, which have their own self-dealing rules. An excess benefit transaction is one in which the organization gives a disqualified person economic benefit worth more than what it gets back, services included. A disqualified person is anyone who was in a position to exercise substantial influence over the organization at any time in the five years before the deal, plus family members and entities they control. Executive directors, board chairs, treasurers and founders usually qualify.

Tax under IRC 4958	Who pays	Rate
First-tier tax	The disqualified person who received the benefit	25 percent of the excess benefit
Manager tax	Any officer, director or trustee who knowingly participated, unless not willful and due to reasonable cause	10 percent of the excess benefit, up to $20,000 per transaction for all managers together
Second-tier tax	The disqualified person, if the excess is not corrected within the taxable period	200 percent of the excess benefit

The taxes are reported on IRS Form 4720. "Correction" under 4958(f)(6) means undoing the excess benefit to the extent possible and taking whatever other steps are needed to leave the organization no worse off than if the insider had dealt with it under the highest fiduciary standards. In practice that usually means repaying the excess with interest.

The protection is the rebuttable presumption in Treas. Reg. 53.4958-6. Pay, or a property deal, is presumed reasonable if:

1. it was approved in advance by an authorized body (the board or a committee) made up entirely of people with no conflict of interest in the arrangement;
2. that body obtained and relied on appropriate comparability data before deciding; and
3. it documented the basis for its decision concurrently.

The IRS can then rebut the presumption only with evidence strong enough to overcome the comparability data the board used. Small groups get a break on the data: an organization with annual gross receipts (including contributions) under $1 million is treated as having appropriate data if it has compensation data from three comparable organizations in the same or similar communities for similar services. "Concurrently" has a deadline: the records must be prepared before the later of the next meeting of the board or committee, or 60 days after the final action, and then approved by that body within a reasonable time. Form 990, Part VI, line 15 asks whether the group's process for setting the top executive's pay included independent review, comparability data and contemporaneous documentation, the same three steps.

Personal liability: immunity, insurance and indemnification

Board members worry about being sued, and they are sometimes sued: by a vendor, a former employee, a member who lost an election, or someone injured at an event. Idaho and federal law limit their exposure in different ways.

Idaho Code 6-1605. In any nonprofit corporation or organization as defined in 6-1601(6), officers, directors and volunteers who serve without compensation are personally immune from civil liability arising out of their conduct in that role, if the conduct is within the course and scope of their duties and at the direction of the organization. The definition is broad: a charitable corporation or trust, any corporation under Title 30 Chapter 30, or an unincorporated association, organized and existing exclusively for nonprofit purposes, that is either a 501(c)(3) or "regularly bestows benefits to the community at large," and whose net income is not distributable to insiders. Reimbursing actual expenses is not compensation. The immunity does not cover:

• willful or wanton conduct, fraud or a knowing violation of law;
• conduct to the extent it is covered by liability insurance, whoever bought the policy;
• any intentional breach of a fiduciary duty or the duty of loyalty;
• acts or omissions not in good faith or involving intentional misconduct;
• any transaction from which the person got an improper personal benefit;
• violations of the loan section of the former nonprofit act; and
• damages from operating a motor vehicle.

The Attorney General's manual summarizes it as volunteer members not being suable for negligence while remaining exposed for gross negligence or willful or fraudulent acts.

The federal Volunteer Protection Act of 1997. Under 42 U.S.C. 14503, a volunteer of a nonprofit organization is not liable for harm caused by an act or omission on its behalf if the volunteer acted within the scope of responsibilities, was properly licensed if the activity required it, did not cause the harm by willful or criminal misconduct, gross negligence, reckless misconduct or conscious, flagrant indifference to the rights or safety of the person harmed, and was not operating a vehicle that requires a license or insurance. A "volunteer" under 42 U.S.C. 14505 is someone who gets no compensation, other than reasonable expense reimbursement, and no other thing of value in excess of $500 a year, and the term includes directors and officers. The act does not limit suits by the organization against its own volunteers, does not protect the organization itself, and does not apply to crimes of violence, hate crimes, sexual offenses, civil rights violations or misconduct while intoxicated.

Protection	Who it covers	What it does not cover
Idaho Code 30-30-618(4)	Directors who meet the standard of conduct	Directors who acted in bad faith or without ordinary care
Idaho Code 6-1605	Unpaid officers, directors, volunteers and charitable trustees	Willful conduct, fraud, loyalty breaches, personal benefit, vehicles, insured amounts, anyone compensated
Federal Volunteer Protection Act	Volunteers, including directors, receiving no more than $500 a year in value	Gross negligence, willful conduct, vehicles, the organization itself, suits by the organization
Indemnification, Idaho Code 30-30-626	Directors, officers, employees and agents who acted in good faith	Liability to the corporation for negligence or misconduct, unless a court allows it
D&O insurance, 30-30-626(7)	Whoever the policy names	Whatever the policy excludes; read the exclusions

Indemnification and insurance. Section 30-30-626 gives a corporation the power to indemnify directors, officers, employees and agents for expenses, judgments, fines and settlements in suits brought by outsiders, if they acted in good faith and in a manner they reasonably believed was in or not opposed to the corporation's interests. Indemnity for suits brought by the corporation itself is narrower. Someone who wins on the merits must be indemnified for expenses. The corporation may advance defense costs against a promise to repay, and may buy insurance for its people whether or not it could indemnify them. The Attorney General's manual recommends that charities consider directors and officers (D&O) liability insurance and indemnification provisions, because even a frivolous suit costs money to defend. One interaction to know: Idaho's immunity does not apply "to the extent of coverage" under a liability policy, so insurance and immunity work together. The policy pays first, and immunity covers the rest.

The Attorney General and charitable assets

The Attorney General's manual is candid about one limit: the office "does not enforce the Idaho Nonprofit Corporation Act." Disputes over bylaws, elections and meetings are for members, directors and the courts. The office's authority over nonprofits comes from elsewhere.

Idaho Code 67-1401(5) directs the Attorney General to enforce the Idaho Charitable Solicitation Act (covered in lesson 7) and the nonprofit hospital conversion act, "to supervise charitable organizations," and to act against departures from their charitable purpose under Title 48, Chapter 19. That chapter is the Idaho Charitable Assets Protection Act, passed in 2020 after the Legislature found that the Attorney General's existing authority was not well defined.

The act reaches any "charitable organization," defined as a person that holds charitable assets "regardless of the legal form," so it covers unincorporated associations and trusts as well as corporations. Its core rule, 48-1906, makes it unlawful for an accountable person or a charitable organization to knowingly use, or allow the use of, charitable assets inconsistently with the law, with restrictions in a gift instrument, or with the organization's charitable purpose. An accountable person is not liable if they met the 30-30-618 or 30-30-623 standard of conduct, followed a lawful trust instrument, qualify for 6-1605 immunity, or followed a court order that the Attorney General had notice of.

The Attorney General may issue investigative demands and subpoenas (48-1908), accept an assurance of voluntary compliance or consent judgment (48-1909), or sue (48-1910) to get an injunction, a receiver, removal of the person from the organization, termination of the organization, damages or restitution, specific performance, the state's costs and fees, and civil penalties of up to $50,000. Violating a resulting order or consent judgment carries up to $10,000 per violation (48-1912). Recovered charitable assets go back to the organization or, by court-approved cy pres, to a charity with a similar purpose (48-1914). The act also requires charities that hold, or in the prior 12 months received or at any time held, more than $10,000 in charitable assets to notify the Attorney General before dissolving or disposing of all their assets, which lesson 10 covers.

What Idaho cases have looked like

Three matters from before the 2020 act show what the office looks for.

• Idaho Aquarium (2015). The Attorney General's Consumer Protection Division issued a compliance investigation report on April 2, 2015 about the Boise aquarium nonprofit. It found the organization's records "disorganized, unreliable, or inaccurate," pay packages for its two founders that it concluded were unreasonable, a $70,000 loan to a for-profit company in which one founder held an interest that was neither discussed in board minutes nor disclosed on the Form 990, and a board whose members "served primarily as figureheads." Both founders had pleaded guilty in a federal wildlife case. The report proposed ten governance standards; the successor organization adopted new bylaws with independence requirements and term limits in January 2015. The report's diagnosis was blunt: the organization failed because its directors and officers had little understanding of nonprofit law.
• Bingham Memorial Hospital (2015). After a three-year investigation into alleged misuse of charitable assets from 2009 to 2012, including executives' use of hospital credit cards for personal items and a separate for-profit consulting company, with which some hospital executives were associated, using hospital assets without reimbursement, the hospital agreed in August 2015 to pay the Attorney General $50,000 for legal fees and investigative costs, confirm by board resolution that unauthorized personal charges had been repaid, and revise its policies, East Idaho News reported.
• Twin Falls YMCA (2016). The Attorney General found that the chapter had violated charitable trust laws after allegations that its then chief executive misappropriated more than $1 million in restricted donations from 2011 to 2016, KIVI reported on September 14, 2016. The report found restricted gifts had been used for general operations, did not find they were used for private gain, and made five recommendations on record keeping and monitoring contributions. The local board had first sought help after realizing it was getting false financial information.

None of the three turned on exotic fraud. Each involved a board that did not see the books, did not follow its own conflict rules, or did not track restricted money. Those are duty of care and duty of loyalty failures that a reading of the monthly financials would have caught.