Kansas Allows Donor Standing Under UPMIFA, But Similar Effort Falls Short in Ohio for Now

At a Glance

• The purpose of Kansas’ Donor Intent Protection Act is to provide recourse to an individual donor (or legal representative) when a recipient fails to follow restrictions in the endowment agreement.
• Kansas is now the second state to allow donor standing under UPMIFA, following Iowa, which allowed for donor standing when it first adopted UPMIFA in 2008.
• On the other hand, the Ohio General Assembly rejected a similar attempt during its budget approval process to allow donor standing under Ohio’s version of UPMIFA, although there is a possibility that it could be advanced prior to the end of the legislative session in December 2024.

Kansas Allows Donor Standing Under UPMIFA

Kansas’ Donor Intent Protection Act took effect this summer on July 1, 2023, amending Kansas’ version of the Uniform Prudent Management of Institutional Funds Act (UPMIFA, located at K.S.A. §§ 58-3601–58-3625). The purpose of the Donor Intent Protection Act is to provide recourse to an individual donor (or the donor’s legal representative) when a recipient fails to follow restrictions in the endowment agreement. See K.S.A. § 58-3621(b).

A donor, or their legal representative, can file a complaint within two years after discovery of a violation of the endowment agreement, but not more than 40 years after the date the agreement was entered into. See K.S.A. § 58-3623(b). The law defines a “legal representative” as

• the administrator or executor of the donor’s estate,
• a surviving spouse, if there is a judicial settlement of the accounts of an individual’s estate, or
• any living, named individual designated in an endowment agreement to act in place of the donor with respect to the matters expressed in the agreement.

See K.S.A. § 58-3622(f).

While the law grants donors standing to file suit under UPMIFA, it does not allow donors to seek an award of damages or a return of donated funds to the donor or the donor’s legal representative or estate. See K.S.A. § 58-3623(b) and (c)(2). Instead, donors are limited to seeking legal or equitable remedies that are consistent with and restore, to the extent possible, the donor’s intent as expressed in the endowment agreement. See K.S.A. § 58-3623(c). These remedies include, among other things,

• future compliance with or performance of donor restrictions,
• restitution or restoration of property to an endowment fund that was expended or used in violation of the endowment agreement,
• restoration or a change to the name required by the endowment agreement, and
• transfer of property from the endowment fund to another charitable organization.

Id.

The law also allows a charitable organization to obtain a declaratory judgment of the rights and duties contained within an endowment agreement as to any actions contemplated by the agreement. See K.S.A. § 58-3624. This declaration can be sought independently, or in response to a suit brought by a donor. Id.

Kansas is now the second state to allow donor standing under UPMIFA, following Iowa, which allowed for donor standing when it first adopted UPMIFA in 2008. See Iowa Code § 540A.106(5) (allowing a donor or the donor’s designee, whose aggregate donations to an endowment fund exceed $100,000, to bring a lawsuit to enforce restrictions regarding the purpose of the fund).¹

A Similar Effort Falls Short in Ohio for Now

On the other hand, the Ohio General Assembly rejected a similar attempt during its budget approval process to allow donor standing under Ohio’s version of UPMIFA (located at ORC Ann. §§ 1715.51–1715.59).

Ohio Senate Bill 83 would require a donor (or their “benefactor representative”) to first notify the attorney general of any violation of the donor’s endowment agreement by a state higher education institution (as opposed to violations by nonprofits more broadly). If the attorney general does not respond within 180 days, the donor (or their benefactor representative) would have standing to file a complaint to enforce the terms of the agreement. Senate Bill 83 would require that the complaint be filed within six years after discovery of a violation of the agreement, but not more than 50 years after the date the agreement was entered into. Similar to Kansas’ Donor Intent Protection Act, Senate Bill 83 would allow declaratory and equitable relief, but would not allow a judgment awarding damages, court costs, attorney’s fees, or any other award of money or other property.

Although Senate Bill 83 ultimately passed the Senate in May 2023, it has languished in the House Higher Education Committee ever since. A similar bill (House Bill 151) originating in the House has also been held up by the House Higher Education Committee since April. In June, Senate Bill 83 was added to the Senate’s version of the state’s operating budget, but was ultimately rejected and taken out of the budget prior to final passage. This is the second legislative session in a row in which the Ohio General Assembly has considered and rejected donor standing under UPMIFA. See our prior discussion of the Ohio Legislature’s rejection of similar language in Senate Bill 135 during the previous legislative session. Although it was removed from the final version of the budget and continues to be held up in committee, Senate Bill 83 (along with House Bill 151) remains pending; and there is a possibility that it could be advanced prior to the end of the legislative session in December 2024.

Future Developments

Our team will continue to monitor developments of the law in this area.