Can a Mississippi city donate cash to a local cancer-awareness nonprofit foundation?
Plain-English summary
The City of Winona wanted to donate cash to a local nonprofit foundation focused on cancer awareness, diagnosis, and treatment. The City asked whether that's allowed under Mississippi law.
Mississippi's general rule is that municipalities cannot donate to private organizations (Miss. Const. § 66; McAdams v. Perkins, 204 So. 3d 1257 (Miss. 2016)). § 21-17-5, the "home rule" statute, gives municipalities general authority over their affairs but expressly does not authorize donations unless other state law allows it.
§ 21-17-1(8) provides one of the carve-outs:
In addition to the authority to expend matching funds under Section 21-19-65, the governing authority of any municipality, in its discretion, may expend municipal funds to match any state, federal or private funding for any program administered by the State of Mississippi, the United States government or any nonprofit organization that is exempt under 26 USCS Section 501(c)(3) from paying federal income tax.
Two things to note about this authority:
- It's matching only. The city's funds must "match" other funding (state, federal, or private). It's not authority for an open-ended donation.
- The recipient must qualify as a 501(c)(3) nonprofit. Not all nonprofits are 501(c)(3)s. The city's governing authority has to determine that the foundation qualifies under federal tax law. Documentation (the IRS determination letter) is the standard evidence.
So Winona can give the foundation money under § 21-17-1(8) if:
- The foundation is a 501(c)(3).
- The City's funds match other funding for a specific foundation-run program.
- The City makes both determinations on the record.
The AG also referred Winona to the State Auditor for fiscal review of the public-funds expenditure.
What this means for you
If you are a Mississippi city or town considering supporting a local nonprofit
You probably can't just write a donation check. Look for matching authority: § 21-17-1(8) (501(c)(3) program matching) or § 21-19-65 (social and community service programs). Identify the other funding source you're matching, and tie your contribution to a specific program rather than general support.
If you are running a 501(c)(3) seeking municipal support
Approach the city with a specific program, a budget that includes other funding (private donors, grants, etc.), and your IRS determination letter. The city needs all three to make the matching-funds finding.
If your nonprofit is not a 501(c)(3) (e.g., 501(c)(4), 501(c)(6), unincorporated association)
§ 21-17-1(8) doesn't reach you. Other authorities might (specific Mississippi statutes for particular activities), but you cannot rely on the general 501(c)(3) matching authority. Consider whether reorganizing as a 501(c)(3) is feasible if you regularly seek municipal funding.
If you are a city attorney advising on this
Document the analysis carefully:
- The recipient's 501(c)(3) status.
- The specific program being funded.
- The other (state, federal, or private) funding being matched.
- The amount and ratio.
- The board's findings and the resolution authorizing the match.
The State Auditor reviews these on routine audits.
If you are at the State Auditor's office
This kind of payment requires careful documentation. Cities that disburse to nonprofits under § 21-17-1(8) without clear matching documentation are exposed.
Common questions
Q: What is "home rule" in Mississippi?
A: § 21-17-5 is the home rule statute, giving municipalities "the care, management and control of the municipal affairs and its property and finances." It's broad, but subsection (2) explicitly does not authorize donations unless another state law permits.
Q: Why does the city need "matching" authority instead of just direct donation?
A: Section 66 of the Mississippi Constitution bars unauthorized donations of public funds. Matching authority avoids the constitutional concern by tying the city's payment to other funding (the implication is the city is enabling, not just gifting).
Q: What kind of "matching" is required?
A: § 21-17-1(8) doesn't specify a ratio. Other state matching statutes sometimes require dollar-for-dollar; § 21-17-1(8) is more flexible. The key is that there is some other funding source, not necessarily equal in amount. Best practice: document the ratio in the municipal resolution.
Q: What's the difference between § 21-17-1(8) and § 21-19-65?
A: § 21-19-65 covers municipal matching for "social and community service programs." § 21-17-1(8) is broader, covering programs run by any 501(c)(3) without a category limit. § 21-17-1(8) was added "in addition to" § 21-19-65, so both authorities can apply, with the broader one usually controlling.
Q: Can the city set conditions on the money?
A: Yes. The city can specify what the funds are used for, require reporting back, and impose oversight. These are reasonable conditions and don't change the donation/matching analysis.
Q: What if the nonprofit is a 501(c)(3) but doesn't have any other funding?
A: Then the matching requirement isn't met. The city can't match nothing. The nonprofit needs to identify other funding sources before the city can contribute under § 21-17-1(8).
Q: Does federal money count as "private funding" for matching?
A: § 21-17-1(8) lists "state, federal or private funding" all on equal footing. So matching could be against federal grant funds, state appropriations, private foundation grants, or individual donations. Any of these qualify.
Q: How does the city verify 501(c)(3) status?
A: The IRS determination letter is the standard. The IRS also maintains the Tax Exempt Organization Search tool online. Confirm both that the organization has been determined to be 501(c)(3) and that the determination is still in effect (not revoked).
Background and statutory framework
The Mississippi constitutional and statutory architecture around municipal donations is layered:
Constitutional limits. Miss. Const. § 66 (donations or gratuities require two-thirds legislative vote). Miss. Const. § 95 (no donation of state lands to private corporations or individuals).
General home rule. § 21-17-5 gives municipalities broad authority over their affairs but expressly excludes donations unless authorized.
Specific authorizations. The Legislature has passed many specific donation authorizations over the years, each addressing particular policy areas:
- § 21-19-65: matching funds for social and community service programs.
- § 21-19-69: support for certified farmers' markets.
- § 21-17-1(8): matching funds for 501(c)(3) nonprofit programs (a relatively broad authorization).
§ 21-17-1(8) is the workhorse for general nonprofit support. It's broader than the social-services authority of § 21-19-65 but narrower than a general donation authority would be (which the constitution wouldn't allow). The matching limitation is the key constraint.
The Mississippi Supreme Court in McAdams set the underlying donation rule for cities: "Donations by a municipality are unlawful and violate the Mississippi Constitution. Indeed, a municipal board cannot lawfully give away public money." (Internal citations omitted.) Specific statutory carve-outs are how the Legislature creates exceptions.
The AG's job in Kirk is straightforward: identify the relevant authority (§ 21-17-1(8)), explain its requirements, and let the City make the factual findings. The opinion is informational rather than novel.
Citations and references
Constitution:
- Miss. Const. § 66 (donations require two-thirds legislative vote)
Statutes:
- Miss. Code Ann. § 21-17-1(8) (municipal authority to match funding for 501(c)(3) programs)
- Miss. Code Ann. § 21-17-5 (home rule statute)
- Miss. Code Ann. § 21-19-65 (matching funds for social and community service programs)
- 26 U.S.C. § 501(c)(3) (federal tax-exempt nonprofit definition)
Source
- Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
- Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2023/11/R.Kirk-November-29-2023-Municipal-Donation-to-Local-Nonprofit-Organization.pdf
Original opinion text
November 29, 2023
R. Adam Kirk, Esq.
Attorney, City of Winona
1320A Sunset Drive
Grenada, Mississippi 38901
Re: Municipal Donation to Local Nonprofit Organization
Dear Mr. Kirk:
The Office of the Attorney General has received your request for an official opinion.
Background
According to your request, the city of Winona ("City") desires to make a donation to a local nonprofit organization that focuses on cancer awareness, diagnosis, and treatment.
Question Presented
Is a cash donation by the City to a local nonprofit foundation allowable under state law?
Brief Response
Under the authority of Mississippi Code Annotated Section 21-17-1(8), the City's governing authority has the discretion to "expend municipal funds to match any state, federal or private funding for any program administered by . . . any nonprofit organization that is exempt under 26 USCS Section 501(c)(3) from paying federal income tax." (emphasis added). If the governing authority of the City determines that the foundation qualifies as a "nonprofit organization that is exempt under 26 USCS Section 501(c)(3) from paying federal income tax," then the City may spend funds to match other funding for the purpose of supporting a program administered by the nonprofit in question.
Applicable Law and Discussion
Section 21-17-5, the "home rule" statute, gives the governing authorities of municipalities "the care, management and control of the municipal affairs and its property and finances." However, certain actions, such as granting donations, are not explicitly allowed under the home rule statute unless otherwise authorized by another state law or statute. Id. at (2). Section 21-17-1(8) provides:
In addition to the authority to expend matching funds under Section 21-19-65, the governing authority of any municipality, in its discretion, may expend municipal funds to match any state, federal or private funding for any program administered by the State of Mississippi, the United States government or any nonprofit organization that is exempt under 26 USCS Section 501(c)(3) from paying federal income tax.
(emphasis added). Section 21-19-65, which is referenced in Section 21-17-1(8), authorizes a municipality's ability to match funding solely to support certain "social and community service programs." Section 21-17-1(8), however, goes further and authorizes municipal governing authorities to match funding for programs run by "any nonprofit organization that is exempt under 26 USCS Section 501(c)(3) from paying federal income tax." The authorization in Section 21-17-1(8) overrides the general prohibition against municipal donations and permits the governing authorities of a municipality to spend funds to match funding for programs administered by 501(c)(3) nonprofit organizations.
If the City's governing authority determines that the foundation in question is a 501(c)(3) nonprofit exempt from paying federal income tax, then under the authority provided in Section 21-17-1(8), the City may spend funds to specifically match any other funds for the purpose of supporting programs run by the nonprofit. Because your request deals with the expenditure of public funds, we also refer you to the Office of the State Auditor.
If this office may be of any further assistance to you, please do not hesitate to contact us.
Sincerely,
LYNN FITCH, ATTORNEY GENERAL
By: /s/ Misty Monroe
Misty Monroe
Assistant Attorney General