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Compliance Considerations for Companies and Individuals Donating Funds, Goods, or Services to Domestic Government Entities

April 6, 2020, Covington Alert

As the coronavirus pandemic continues across the country, many corporations, organizations, and individuals are looking for ways they can help fight back. This often includes donating money, goods, or services to federal, state, or local government entities. These well-intentioned donations can generate compliance problems if not handled appropriately from the start. While the situation will be different in each jurisdiction, outlined below are a handful of key compliance issues to consider when making such donations.

Restrictions on Government Gift Acceptance

  • At the federal level, the Anti-Deficiency Act and rulings by the Government Accountability Office restrict the government’s ability to accept donations of services and goods. Similar rules may exist at other levels of government. This does not mean donations are impermissible in all cases, but you must carefully navigate these complex rules to ensure that the agency in question can legally accept the gift from a private person.

Illegal Gifts

  • In many jurisdictions, giving something of value to any third party at the request of a government official or employee can be considered a gift to that official or employee and must comply with state or local gift rules. In other places, ethics rules prohibit any solicitations of gifts by public officials and employees. If your donation was solicited by a public official or employee, be sure it complies with applicable gift rules, including any reporting obligations.

Conflicts of Interest

  • There are great variations among federal, state, and local conflict of interest rules, but they often prohibit public officials and employees from self-dealing, having financial interests that could conflict with their duties, engaging in transactions with contractors or lobbyists, or disclosing confidential information to third parties. These rules may bar a particular government official from playing any role with respect to soliciting or accepting donations from private parties.

Private Pay for Public Work

  • More generally, government ethics rules often prohibit performing public services for private compensation. Before donating employee time to government entities, or offering pay or benefits for government employees, check how these rules work in the relevant jurisdiction.

Bribery, Illegal Gratuities, and Kickbacks

  • It goes without saying that you should not donate with an expectation or agreement to receive anything in return, which would be a bribe. But at the federal level and in many other jurisdictions, it is also a crime to give an “illegal gratuity,” which is something of value given to a public official or employee because of a past or future action, even absent a quid pro quo. If your organization does business with or otherwise receives money from the government, you should also consider whether there are restrictions under anti-kickback laws, government contracting rules, or in the terms of the contract or grant agreement itself.

Tax Considerations

  • Charitable contributions may be deductible by a U.S. taxpayer for federal income tax purposes, including contributions to the federal government, a state, the District of Columbia, and local governments, but only if the contribution or gift is made for exclusively public purposes, which would include supporting a government’s pandemic response. The donation of services is not deductible.    

This information is not intended as legal advice. Readers should seek specific legal advice before acting with regard to the subjects mentioned herein.

If you have any questions concerning the material discussed in this client alert, please contact the following members of our Election and Political Law practice.

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