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Frequently Asked Questions (FAQ)

 

Donations

Question:
The city wants to purchase property, but has limited funds. The seller wants $180,000. If the city and seller agree, can the city pay $140,000 and acknowledge receipt of a gift in the amount of $40,000?

Answer:
Yes, if the value of the property is $180,000. The city should have an agreement from the seller that the seller will pay for an appraisal and hold the city harmless if the IRS challenges the gift.

Question:
Can a city or village make a donation to the local Little League team?

Answer:
It is quite difficult to meet the standard of “public purpose” for these expenditures. The Michigan Supreme Court has also held that an improper “lending of credit” occurs when a municipality gives something of value without getting something of specific value in return. In some instances there may be the possibility of contracting with the organization for services, e.g. contracting with an organization to provide recreational opportunities for youth. You will need to talk with your municipal attorney about this.

The League has a One-Pager Plus on municipal expenditures which you may find helpful. There is also a Bulletin prepared by the Michigan Department of Treasury on the determining lawful expenditures and a handout prepared for MML on municipal finance.

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