Restricted Giving: The Legal Requirements Nonprofits Should Consider Before Accepting Restricted Donations
To the delight of many nonprofit professionals, the pandemic led to an increase in unrestricted giving in 2020 and 2021 for their organizations. Many people in the nonprofit world prefer unrestricted donations because they can be used for any purpose — unlike restricted donations, which can only be used in a particular way according to the donor’s wishes. Although some organizations may have experienced an uptick in unrestricted giving, restricted donations aren’t going away, and, when used effectively, they can be an important part of fundraising for a capital campaign or a new program.
When a nonprofit accepts restricted donations, a duty arises on the part of the organization to abide by any restrictions set by the donor. Failing to abide by that duty can expose the organization to enforcement actions by state charity regulators, potential lawsuits from the funder and reputational damage that erodes the donor’s trust. By fully understanding the legalities of restricted donations, nonprofits can help reduce the risks associated with accepting restricted gifts and learn to use them to their fullest potential.
Heather DeBlanc is a partner in the Los Angeles office of Liebert Cassidy Whitmore and advises nonprofit clients on corporate governance issues, bylaws, articles of incorporation, best practices for maintaining tax-exempt status, business contracts, grant agreements, and donations, fundraising and endowments.
Casey Williams is an attorney with Liebert Cassidy Whitmore, working solely with nonprofits on employment, governance, and business matters. Based in the San Francisco office, her practice is focused on helping mission-driven organizations achieve their goals while staying compliant and working through complex disputes.
Victoria M. Gómez Philips is an associate in the Los Angeles office of Liebert Cassidy Whitmore. Victoria advises clients on business and transactional matters, including legal and business risks concerning strategic partnerships, contracts, employment, operations, and company policies.