Review of Gift Policies

Gifts to public libraries, and the proper handling of gifts, are becoming an increasingly important issue for library trustees. As other sources of income have either shrunk or have merely kept pace with costs, donations to the library are actively sought as a means to provide for special needs, necessary renovations, or even new buildings. Some libraries have been fortunate to receive sizable donations as either outright gifts or as challenges to inspire additional gifts. One of the best ways to foster gifts to the library is to have a carefully developed gift policy and to demonstrate the wise stewardship of the gifts received.

District library trustees are authorized to accept gifts and grants for a district library by the grant of powers enumerated in Section 12 of the District Library Establishment Act, MCL 397.182. Other public library boards are authorized to receive and accept gifts and donations of both real and personal property by virtue of Michigan Public Act 136 of 1921. This act also empowers library trustees to dispose of property no longer needed for library purposes.

All public libraries should have a gift policy that addresses the acceptance of donations, both large and small, and the manner in which gifts must be handled. Many libraries have adopted policies that prohibit the acceptance of any gifts with conditions or restrictions. Others stipulate that gifts with onerous or burdensome conditions will not be accepted. Some libraries specifically delegate the authority to accept small gifts, such as used books or memorial donations under a certain amount, to the library director.

Library policy should also inform donors of tangible property that the library may not appraise or otherwise put a value on such gifts. Internal Revenue Service regulations and Section 155a of the Tax Reform Act of 1984 clearly state that the appraiser must not be the library which receives the item. Donors should be advised of this rule before the gift is accepted in order to allow them time to work with their own financial advisors and to make whatever arrangements are necessary for an appraisal.

For the first time since its enactment, Public Act 136 of 1921 has been amended. Public Act 370 of 1998, signed into law on 20 October 1998 with immediate effect, amends Section 1 of the Act, MCL 397.381, to give libraries the option of transferring gifts of intangible personal property to a component fund within a community foundation under certain conditions. Advocates of this legislation expressed the hope that this provision would foster cooperation and partnerships between local libraries and community foundations and better achieve the purposes intended by donors. Additionally, gifts could be added to the larger endowments of community foundations and invested according to foundation practices, with the earnings to be put to the intended uses.

It is important to realize that this option does not extend to real or tangible property or to federal or state grants. Neither does it apply to general operating funds. The investment of a public library's surplus funds is governed by the provisions of Public Act 20 of 1943.

If library boards choose to utilize this option, care must be taken to honor any conditions or restrictions placed on the gift. The community foundation would need to agree to the restrictions and, under certain conditions, would have to return a transferred gift to the library. To assure proper handling of the gift, the library may require a community foundation to establish a donor advisory board to make recommendations in regard to the transferred gift.

Even if there are no large gifts on the horizon, a sound gift policy and a knowledge of some transfer and investment options is an essential part of the trustees' obligation to manage library property prudently.

The advice and counsel of professionals from the legal and financial community should be sought both when formulating policy and when dealing with large donations.

Public Act 370 of 1998, enrolled HB 5389, and the legislative analysis may be found on the Michigan Legislature Web Site at http://www.michiganlegislature.org

By Ellen Richardson
Library Law Specialist
January 1999

Updated 04/27/2006