While in these reports we do not often stray from reporting court opinions released for public consideration, an Associated Press article by Jim Vertuno and Pat Eaton-Robb that appeared in a USA Today affiliate on October 1, 2022 seemed to require some notice. The reporters stated: “The new world of college athletes getting paid for endorsements has created a rapidly expanding pop-up industry: Brand new nonprofits that set up athletes to promote charities for a fee.” The article indicated the federal government was scrutinizing some of these “brand new nonprofits.” Of course, old charities would have an easier time of it. That would include churches.
Imagine next week’s worship services described in glowing sports terms by a locally famous high school or college athlete. In my state, in which sports figures are all but demigods when they are winning, and discarded when they are not, many churches, parachurch organizations, church schools and denominations may one day soon be signing athletes to such endorsement deals. The debate about whether such advertising and endorsements are a good thing will be left for others. The debate about whether such deals would be good for high school and college sports will be avoided altogether in this report.
These deals will attract existing participants or members of the long existing non-profit to fulfill two desires: pay their favorite athlete and support the mission of the non-profit. That they will also get a tax deduction might simply be a bonus. If the member or participant exerts too much influence as to the choice of the athlete or the deal between the non-profit and the athlete, taxing authorities may have grounds for arguing the money paid was not a donation at all. On the other hand, the member or participant may have some indirect “say” in these matters while on a governance board upon which they are otherwise already serving. The athlete may even be a product of the youth group. Donations made early in the tax year and paid out later in the tax year might not seem directly related either to donor intent or the endorsement deal. Donors who are not acknowledged as “sponsors” of the deal may fare better than donors who are acknowledged, even if everyone in town or in the non-profit entity knows the donor.
Generally, donation to a charity does not give the donor any legally protected interest in the operations, management or spending of the charity. However, that does not give the charity free reign to issue any inducement to donate that is false or corrupt. Donors must be able to show the amounts given and the economic loss from the gift. Merely being offended or disappointed in the failure to perfectly appreciate or follow donative intent will not state a claim.
In Carrier v Zacharias International Ministries, Opinion and Order (ND GA, 2022), the federal trial court, in part, overruled a motion to dismiss. The case will proceed but no outcome can be predicted at this stage. The Plaintiffs alleged they donated money because they believed the representations that Ravi Zacharias and his company, RZIM, were worthy of trust. However, Plaintiffs alleged Zacharias was a serial sexual predator. Zacharias allegedly invested in two “health spas” at which “nearly two dozen therapists” reported inappropriate sexual behavior by Zacharias. Zacharias allegedly used donated money to pay for silence and compliance. Complaints in writing were made three years before Zacharias died but RZIM allegedly did not investigate the complaints. Zacharias allegedly travelled to speaking engagements accompanied by a spa “therapist” using donated funds. Plaintiffs alleged they would not have donated money if they had been made aware of the facts. Plaintiffs filed a Class Action. The Court held it was barred by the Ecclesiastical Abstention Doctrine from hearing claims that Zacharias or RZIM were engaged in immoral conduct in violation of their spiritual messages. But, the Court held it would hear claims “predicated on misuse-of-funds allegations” because no ecclesiastical inquiry was required and Neutral Principles of Law applied. In addition to “misuse-of-funds” claims, the Court held it would hear claims that Defendants “wrongfully failed to disclose their misuse of donor funds” even though they had “exclusive knowledge” of the alleged misconduct.
While it is nearly impossible for claims by angry donors to obtain a judicial remedy by objecting to management decisions by a charity, using donated funds for personal expenses like settling sexual misconduct claims and funding sexual misconduct might be viable with adequate detailed proof. In the reported case, the Defendant non-profit entity investigated and self-reported the allegations, although allegedly only after many detailed claims were submitted, so the detailed proof might have been made public.
The question of whether donative intent is binding often arises in local church leadership discussions. However, donative intent rarely is a factor in church litigation because it is rarely placed at issue by the donor.
In Holy Trinity Romanian Orthodox Monastery v Romanian Orthodox Episcopate, Slip Op. (Mich. App. 2019), the trial court decided based on donative intent that the attempt to transfer the property away from the hierarchical denomination was successful. The Court of Appeals reversed. The court of appeals held that the because the warranty deed gifting the property to the denomination did not preserve the donative intent to provide a life estate to the Plaintiff the donative intent was not relevant. (The trial court also failed to consider the impact of the Ecclesiastical Abstention Doctrine, probably because of the donative intent issue, and was reversed on that as well. Hierarchical denominations retain their church governance sovereignty.)
Donative intent is not preserved simply because the donor tells a church leadership of the intent. Once the gift is made, the donative intent is irrelevant if not preserved in a manner that restricts the ownership or disposition of the ownership of the gift. While among church leaders there are often many urban legends about the binding effect of donative intent, the truth is that it is usually no more binding than the church leadership’s voluntary decision to do so. Fungible gifts like cash lose any connection to the donative intent as soon as the cash is deposited in a church bank account.