You are here

Can building fund donations be used for other purposes?

Your Legal Questions Answered

Can building fund donations be used for other purposes?

Our church has finished a building campaign and some of the elders say that the gifts for the building fund can be spent on other purposes. They cite an IRS Revenue Ruling and the cy pres doctrine. Are they correct? Can I get my gift back and, if I do, will I have to declare taxable income?

The proper use of the funds is a matter of state law and is not controlled by an IRS Revenue Ruling. The elders may think they can use the funds for other purposes because the campaign literature recited a broader purpose, a technique many charities use to assure that they won’t be caught in this kind of trap. But if there was no broader purpose advertised, It would probably be a breach of fiduciary duty, and may be a criminal act, to use funds for a purpose other than that for which they were given.
 
The cy pres doctrine allows a charity to use funds as nearly as possible for the purposes given if circumstances have so changed that it is impossible or impractical to use the funds as designated by the donor. Although a living donor may generally waive the restrictions on a gift, invoking the cy pres doctrine normally requires approval of a court, or at least the Attorney General, and is not a unilateral power of the Board. 
 
A charity will occasionally return funds that cannot be used as designated by the donor. If you do get your money back and you have claimed a charitable contribution deduction on a prior income tax return, you should include the returned funds as income in the year of their return.
Sunday, August 26, 2007

Sign-up for our free weekly Q&A

Comments

I just thought I would mention that the Donor Bill of Rights would prevent the use of funds for any purpose other than what the donor specified or agreed to.

The comment is correct, but the Donor's Bill of Rights, published by the Association of Fundraising Professionals, is an aspirational statement of ethics and does not have the force of law.

Add new comment

Sign-up for our weekly Q&A; get a free report on electioneering