Municipal Friends Group Accepting Donations

Submission Date:


[This question about Friends of the Library and $$$ is from a municipal public library]

We have a newly re-organized Friends group that does not have 501(c)(3) status but would like to accept donations. I know that the library can act as a pass-through for grants but I was wondering if this also applies to undesignated monetary donations?


This issue—the question of a public library acting as a pass-through on an ongoing and open-ended basis for its Friends—is like a mouse seeking cheddar[1] cheese in a maze.

Picture the mouse: whiskers a-quiver.[2] It can smell the cheese. It sees the maze.

Picture the cheese: it's yellow, made in upstate New York, and sliced just right. It would be delicious with a whole wheat cracker.

Now picture the maze: so tantalizing. So twisty and turny. There are many paths forward, but only one has a tantalizing dairy product[3] at the end.

Except: there is actually no path to the cheese.

That's what this issue is like.

Here's why:

With a "pass-through", a 501(c)(3) agrees to accept the award of a tax-deductible donation; usually, this is done per the terms of a "pass-through agreement"[4] with a non-501(c)(3) individual or group, for a charitable purpose.

Examples of a pass-through include:

  • A school district public library and a local artist agree to jointly apply for a grant from a foundation so an unincorporated artists collective can paint a mural at the library, but the grant is solely to the library, who "passes" the money to the artists' group for the project;
  • A municipal public library affiliates (in writing) with a newly incorporated not-for-profit refugee assistance group without a 501(c)(3) to accept a grant for a language assistance program;
  • An association library agrees to be a pass-through on a per-project basis for any local group offering programming consistent with the mission of the library; per the letter of agreement by which an organization in the area of service can participate, the administrative fee charged by the library is either 5% of the grant or $1500, whichever is smaller. Participants are tied to a strict set of performance criteria and accounting is set up to ensure documentation is immaculate.[5]

While there are a variety of fiscal and operational procedures that each of these written arrangements would have to follow, each of them shares a common feature—an endgame to the purpose of the pass-through (e.g., the mural is painted, the English-language learners program is launched, and the objective of each "per project basis" is met).

The member who submitted the question rightly highlights the crux of the question here: can this approach be used for unspecified purposes, with the 501(c)(3) accepting tax-deductible donations and then giving it to the non-501(c)(3) entity?

The answer is "No." Here is why:

In the three examples, and other defensible pass-throughs, the donation money going to the unincorporated or non-501(c)(3) entity is conditioned on the objectives set by the grant. In other words, the money is not a gratuity or a donation; it is part of a "quid pro quo" transaction, with the "quo"[6] being consistent with the conditions of the donor.

Accepting unconditional donations to then re-gift them to an unincorporated or non-501(c)(3) entity is a totally different situation from the "quid pro quo."[7] For an association library, it would be frowned upon, but with some careful maneuvering (a written agreement making the Friends an offshoot of the association library's operations), it could be done and properly accounted for in the required financial disclosures.[8] But for a municipal library, with its extra conditions and an absolute bar on just giving away money,[9] there is no way to make the otherwise elegant solution suggested by the member work.

So, the maze of options has no way to get to the cheese. Is there another way?

There is, but it is largely antithetical to the purpose of having a "Friends" group.[10]

Here is the way: the donations to the public library would go to a "Friends Fund" that is 1) always in the custody of the library; 2) managed and expended per all the fiscal controls of the library; and 3) is only distributed to Friends per an agreement that creates defined conditions (the "quid pro quo") , so it is clear the funds have been used "for the benefit of the library."

For example: The board of the ABC Town Library resolves to create a "Friends Fund" for very well-defined parameters, including that when the fund reaches $50,000.00 dollars, the board meets with the Friends to discuss how it will be used. In 2024, 100 people each donate $500.00 tax-deductible dollars to the ABC Town Library's "Friends Fund." The library’s board of trustees then meets with the Friends and passes a resolution to disperse the money with well-defined deliverables, effectively turning the collected funds into a "grant" or even a "contract for services." The grant or contract is then managed per all the same applicable fiscal, operational, and procurement requirements that the library always has to follow.[11]

Of course, by the time a library and friends group go through all that—only to have a structure that is far less flexible than a traditional Friends group—the Friends might want to just take the time to get 501(c)(3) status.[12]

Thank you for a thoughtful question.[13]


[1] Because it's money. (...get it?)

[2] I know that likening "Friends" to a mouse risks sounding crude. But mouse-as-human imagery has a long and noble tradition (think Redwall, Ben and Me, Tales of Despereaux, Tom & Jerry...).

[3] Do mice eat soy?

[4] Or, sometimes, an "undocumented understanding"...but that can lead to trouble.

[5] For this reason, many, many not-for profits have a policy of "never" serving as a pass-through, while others are specifically set up to act as a pass-through for efforts consistent with their charitable purpose.

[6] And, for that matter, the "quid."

[7] As I was working on this reply, the phrase "charitable money laundering" kept entering my brain.

[8] Do not attempt this without the help of a CPA or an attorney.

[9] This "bar" is imposed by Article VIII, Section 1 of the Constitution of the State of New York.

[10] The "purpose" being the enabling of private donations managed by an independent group for the benefit of a public library without the fiscal, operational, and communication strings that come with being a public entity.

[11] Which are extensive! If you want a fun read, check out the New York State Comptroller's "Accounting and Reporting Manual" for libraries at It's basically just the playbook for accounting for library funds and includes how grant and donation money is documented and reported.

[12] The IRS 1023 is not so bad! And making "Friends" donations tax-deductible is one of the more fun things they get to do.

[13] And for putting up with my cheesy analogies.


Friends of the Library, Municipal Libraries, Donations, 501c3, Non-profits, IRS