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Legal Rules for Municipalities Accepting Donations

In 1995, during the trial of Susan Smith for murdering her sons, the Union County attorney asked the SC attorney general an unusual question: Could the county accept contributions from the public to pay for the prosecution? In an opinion issued January 25, 1995, the SC attorney general determined that the county government could accept such contributions if they were used for their intended purpose. 

Although the facts were unique, the attorney general’s analysis applies to any donation of property — equipment, funds, real estate or other forms of property.

May a local government accept a donation?
Yes, South Carolina law almost certainly confers the power to receive donations. Even before the Home Rule Act in 1975, the South Carolina Supreme Court upheld a gift of land to a city. In an 1896 case, McIntosh v. City of Charleston, cited by the attorney general, the Court stated that it was “reasonable and just” that municipalities “may be the objects of public and private bounty.”

May a donor impose conditions on the gift?
Generally, yes. As noted in the leading treatise on municipal law, McQuillin’s Law of Municipal Corporations, “a municipality is authorized to accept a grant subject to reasonable restrictions and conditions, by which it is bound when the grant is accepted.” 

In many cases, the failure of the municipality to observe the conditions of a donation will render the gift invalid, meaning that the municipality might have to return the donation.

Are there conditions to which a municipality may not agree?
Yes. The municipality must have the legal power to perform the function to which the donation is restricted. For example, a donation could require that the municipality use the gift to support religious education. This use would likely violate the First Amendment, so the municipality could not agree to those terms.

Once the donation is accepted, it becomes public property, and the use of the donation must serve a public purpose. The municipality could not agree, for example, to accept a gift to use for the exclusive benefit of a private person.

Finally, the municipality cannot bind the governmental functions of future councils, including by accepting a donation condition. For example, consider a donation requiring the municipality to agree not to annex a certain parcel of land. Annexation is a governmental function, and a municipality may not agree to forbid future councils from exercising that function, so it would be improper for the council to agree not to annex the parcel in the future.

Must the municipality accept a donation?
No. The municipality always has the right to refuse a donation. In fact, the municipality should carefully consider the costs and benefits of any offered donation. 

Will the donation impose future costs on the municipality, for example, by requiring expensive or time-consuming maintenance? Will it create an appearance of impropriety? Could accepting the donation imply that the municipality will favor the donor in future procurements? Will it overly restrict the municipality in the future, such as by influencing its decision-making processes?

Is a donation to a municipality tax-deductible for the donor?
Potentially, but this is a complex question. At a minimum, the donation must be used exclusively for public and governmental functions. Because the question is complex, municipalities should instruct donors to consult their own attorneys. They should not guarantee that the donation will be tax-deductible. Ideally, the municipality will provide a receipt that includes
  • basic information about the donation — the name of the municipality, date of the donation, the amount or item donated and use of the donation;
  • a statement that no goods or services were received in return for the donation; and 
  • a notice that the donors should consult with their own tax professionals about deductibility.