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Nonprofit Law/Returning Donation to Donor


We are a TX 501(c)3 animal rescue established for 1 1/2 years. We were created to help our city shelter go "no-kill".  Our fact sheet stated that sole focus. At approx. 6 months, a former Board member and volunteer helping with fundraising received a large donation. As months wore on, it became clear the shelter was not heading toward a no-kill status.  We altered and expanded our mission statement to assist all shelters in this area of TX but no dedication to one. The current board met with this large donor at the beginning of this year to relate our change in mission.  The donor "released" 1/4 of the whole donation amount to us to continue with our new focus.  The donor has since become involved with the original shelter encouraging their progress to become no-kill.  We verbally agreed to the hold of the remaining 3/4 of the donation at this meeting, but months have worn on and the shelter is stating they are several years away from this change in procedure.  We still have that "earmarked" money in our account.  We do not want it just sitting there like a bank account.  If the donor were to contact us to write a check to the city, we do not want to donate to any city efforts for this shelter.  Does this donor have a legal right to give permission and dictate the use of the remaining amount?  The intent initially is not in writing and the intent has been relayed to us differently several times by the people taking the donation. If we needed to accept this "permission" and write a check for the money, we would write a personal check to the donor which I assume causes an amendment to both our tax returns?  Up until the point we changed our mission statement, all monies donated while we were soliciting for this city shelter were used for this shelter.  Would love to have your feedback as we strive to end this link to a past mission statement.  Thank you so much for your help.

Generally, donors give up any authority over donated items and
funds, unless they had a specific signed agreement with the
nonprofit with a reverter clause or at least a letter indicating
the conditional nature of the gift.

This an issue called "enforceability of a restricted gift to a
nonprofit organization"

A case that discusses the issues is at:
starting in the middle of the first column.

Although that was a Connecticut case, most states would have
similar treatment.  In other words, a donor who has made a
completed charitable gift to a nonprofit organization does not even
have standing in a court to bring an action to enforce the terms of
that gift unless the gift instrument contained an express
reservation of control over the disposition of the gift, such as a
right of reverter or a right to redirect. A right of reverter means
that the donation would be refunded if the charity breached the

If you do, anyway, decide to refund some of the donation, for refunds of donations where a deduction was taken in a previous year, put that amount on line 21 of your form 1040 as stated in IRS publication 17 on page 84 of -- "Recoveries
A recovery is a return of an amount you deducted or took a credit
for in an earlier year. The most common recoveries are refunds,
reimbursements, and rebates of deductions itemized on Schedule A
(Form 1040)."

The organization must send to the IRS a 1099-Misc indicating the
amounts of the refunds given to persons if the amount is $600 or
more and the organization had previously given an acknowledgement
of donation to the donor.

See the first column of page 1 under "Specific Instructions"
which is the IRS instructions for form 1099-Misc, "At least $600 in
rents, services... other income payments."

Details about recovery rules are on page 22 of "Taxable and Nontaxable Income"
The statutory authority is 26 U.S.C 111 "Recovery of Tax Benefit
Items" which you may review at:

Harvey Mechanic, Attorney at Law -

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.  

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Harvey Mechanic


DO NOT GIVE ME INFORMATION THAT YOU WANT KEPT CONFIDENTIAL. I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "" without the quotes and then add your search terms before hitting enter.


I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.


B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.

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