A Virginia judge has declared that "an affordable housing project above a church in Arlington County does not violate the constitutional separation of church and state" according to the Washington Post.
Among a variety of arguments used by a local resident (apparently motivated by not having affordable housing located near high-end housing) was that the "nonprofit board's domination by church members furthered the entanglement" between the church and the housing nonprofit". The planned project included the nonprofit's building an eight-story housing project on top of the church. Income contributed air-rights will help the church in-turn complete a needed renovation.
Even if the boards of the two entities are "entangled" this case can provide a reminder to all nonprofit board members that, when serving as a board member, their first duty of loyalty is to that nonprofit. At the same time, individuals serving on more than one board, especially of nonprofits that may have a business relationship, will likely face an occasional challenge when trying to be clear which "hat" they are wearing at a particular decision.
It will certainly rests on the chair and unrelated board members to help all ensure the best interests of that nonprofit. Of course an alternative answer: don't do this or at least have a majority of the board without competing demands.