Can a Mississippi city donate cash to a local cancer-awareness nonprofit foundation?

Plain-English summary

The City of Winona wanted to make a cash donation to a local nonprofit foundation focused on cancer awareness, diagnosis, and treatment. The City's attorney asked whether that is allowable under state law.

The AG answered conditionally. It explained that § 21-17-5, the "home rule" statute, gives municipalities "the care, management and control of the municipal affairs and its property and finances," but that "certain actions, such as granting donations, are not explicitly allowed under the home rule statute unless otherwise authorized by another state law or statute."

§ 21-17-1(8) provides one such authorization:

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 features of that authority drive the answer:

1. It is matching authority. The city's funds "match" other state, federal, or private funding for a program; the opinion describes it as overriding "the general prohibition against municipal donations" for matching purposes.
2. The recipient must qualify as a 501(c)(3) nonprofit. The opinion holds that if the city's governing authority determines the foundation qualifies as a "nonprofit organization that is exempt under 26 USCS Section 501(c)(3) from paying federal income tax," the city may spend funds to match other funding for a program run by the nonprofit.

The opinion also refers the city to the Office of the State Auditor because the question deals with the expenditure of public funds.

What this means for you

Mayors, city councils, and city attorneys

The opinion holds that the home rule statute (§ 21-17-5) does not by itself authorize donations unless another statute permits, and that § 21-17-1(8) supplies that authority for matching funds. Under § 21-17-1(8), the city may "expend municipal funds to match any state, federal or private funding" for a program run by a 501(c)(3) nonprofit, once the governing authority determines the recipient qualifies as a 501(c)(3).

501(c)(3) nonprofit directors

The opinion's authority runs to programs administered by an organization "that is exempt under 26 USCS Section 501(c)(3) from paying federal income tax." The city's spending is described as matching other funding for the program, not as a stand-alone donation.

State Auditor staff

The opinion refers the city to the Office of the State Auditor because the question involves the expenditure of public funds, and conditions the authority on the governing authority's determination of the recipient's 501(c)(3) status.

Common questions

Q: What is the "home rule" statute, and does it allow donations?
A: The opinion identifies § 21-17-5 as the home rule statute giving municipalities "the care, management and control of the municipal affairs and its property and finances," but notes that "certain actions, such as granting donations, are not explicitly allowed under the home rule statute unless otherwise authorized by another state law or statute."

Q: What does § 21-17-1(8) let the city do?
A: It lets the governing authority, in its discretion, expend municipal funds to match any state, federal, or private funding for a program administered by a 501(c)(3) nonprofit (among other entities). The opinion says this "overrides the general prohibition against municipal donations" for that matching purpose.

Q: What does the city have to determine first?
A: Per the opinion, the city's governing authority must determine that the foundation qualifies as a "nonprofit organization that is exempt under 26 USCS Section 501(c)(3) from paying federal income tax."

Q: How does § 21-17-1(8) compare to § 21-19-65?
A: The opinion notes § 21-19-65 authorizes matching "solely to support certain 'social and community service programs,'" while § 21-17-1(8) "goes further" and reaches programs run by any 501(c)(3) nonprofit.

Background and statutory framework

The opinion frames the question through two statutes. 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," but the opinion notes that donations are "not explicitly allowed under the home rule statute unless otherwise authorized by another state law or statute."

Section 21-17-1(8) supplies that authorization for matching funds:

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.

The opinion contrasts this with § 21-19-65, which it describes as authorizing matching "solely to support certain 'social and community service programs.'" Section 21-17-1(8) "goes further" to reach programs run by any 501(c)(3) nonprofit, and the opinion states that this authorization "overrides the general prohibition against municipal donations" for the matching purpose it describes. The opinion leaves the factual determination of the foundation's 501(c)(3) status to the city's governing authority.

Citations and references

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