The University of Tennessee, Knoxville

Tennessee County Municipal Advisory Service

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Charitable Contributions

Reference Number: MTAS-1836
Tennessee Code Annotated
Reviewed Date: June 10, 2016
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One budget management issue that comes up frequently is the subject of charitable contributions. How many times have you been asked to contribute to the high school marching band, the Dixie Youth League, the Boy Scouts, the Girl Scouts, or a family who lost everything in a house fire? While your heart may go out to each one of those groups, oftentimes city money can’t. The attorney general has issued several opinions on the subject. Before the governing body agrees to donate money, be very sure that the charity meets all legal requirements. T.C.A. § 6-54-111:

(2) (A) For the purposes of this section, “nonprofit charitable organization” is one in which no part of the net earnings inures or may lawfully inure to the benefit of any private shareholder or individual and that provides year-round services benefiting the general welfare of the residents of the municipalities.

(2) (B) For the purposes of this section, “nonprofit civic organization” means a civic organization exempt from taxation pursuant to § 501(c)(4) or (c)(6) of the Internal Revenue Code of 1954, codified in 26 U.S.C. § 501(c)(4) or (c)(6), which operates primarily for the purpose of bringing about civic betterments and social improvements through efforts to maintain and increase employment opportunities in the municipality by promoting industry, trade, commerce, tourism and recreation by inducing manufacturing, industrial, governmental, educational, financial, service, commercial, recreational, and agricultural enterprises to locate in or remain in the municipality…

In addition to meeting these strict requirements, any nonprofit organization that seeks a contribution from your municipality must give the city clerk a copy of its annual report, including its audit, a description of its program that serves the residents of the community and the proposed use of the municipal funds.

Municipalities may also make appropriations to nonprofit organizations other than charitable organizations, but only after publishing in a newspaper of general circulation the municipality’s intent to make the contribution and specifying the intended amount and the purpose for which the money will be spent.

In addition to T.C.A. requirements, the comptroller’s office has addressed contributions to nonprofit organizations in Title 5, Chapter 29 of the Internal Control and Compliance Manual for Tennessee Municipalities.

Responsible: