Kansas 2023 2023-2024 Regular Session

Kansas House Bill HB2170 Comm Sub / Analysis

                    SESSION OF 2023
SUPPLEMENTAL NOTE ON SENATE SUBSTITUTE FOR 
HOUSE BILL NO. 2170
As Recommended by Senate Committee on 
Federal and State Affairs
Brief*
Senate Sub. for HB 2170 would create the Donor Intent 
Protection Act, which would provide legal recourse to an 
individual charitable donor when the donor’s gift restrictions 
are not followed by the recipient charitable organization.
Purpose (Section 1)
The bill would state that its purpose is to provide legal 
recourse to an individual charitable donor. The bill would state 
recourse is available when pursuant to an endowment 
agreement, the donor’s gift restrictions are not followed.
The bill would further require the recipient be a 
charitable organization governing an endowment fund that 
must contain only property gifted by that single, individual 
donor.
Definitions (Section 2)
The bill would define terms as follows:
●“Charitable organization” would mean an 
organization organized and operated exclusively 
for religious, charitable, scientific, testing for public 
safety, literary, educational, or other specified 
____________________
*Supplemental notes are prepared by the Legislative Research 
Department and do not express legislative intent. The supplemental 
note and fiscal note for this bill may be accessed on the Internet at 
http://www.kslegislature.org purposes that is exempt from federal income 
taxation as a 501(c)(3) entity under the Federal 
Internal Revenue Code;
●“Donor” would mean an individual who has made a 
gift of property to an existing endowment fund of a 
charitable organization or that establishes a new 
endowment fund of the charitable organization 
pursuant to terms of an endowment agreement that 
may include donor-imposed restrictions or 
conditions governing the use of the gifted 
endowment property or funds;
●“Donor-imposed restriction” would mean a written 
statement within an endowment agreement or 
institutional solicitation that specifies obligations on 
the management or purpose of the property gifted 
by the donor of the gift as a condition of the 
charitable organization’s receipt of property 
pursuant to an endowment agreement or 
institutional solicitation;
●“Endowment agreement” would mean an 
agreement between a donor and a charitable 
organization that gifts an endowment fund to a 
charitable organization or gifts property to an 
endowment fund of a charitable organization and 
the donor is the only donor gifting such endowment 
fund or gifting property to such endowment fund; 
○An “endowment agreement” may include 
donor-imposed restrictions or conditions 
governing the use of the gifted endowment 
property or fund;
●“Endowment fund” would mean an institutional fund 
that, under the terms of an endowment agreement 
or institutional solicitation, is not wholly expendable 
by the charitable institution on a current basis. 
2- 2170 ○“Endowment fund” would not include assets 
that the charitable institution designates as an 
endowment fund for its own use and would 
only include those endowment funds 
containing only property gifted by a single 
donor;
●“Institutional solicitation” would mean a record or 
records, including a solicitation for endowment 
funding by a charitable organization, under which 
property is granted to, transferred to, or held by a 
charitable institution as an endowment fund. An 
“institutional solicitation” may constitute or include 
an endowment agreement between the donor and 
the charitable institution;
●“Legal representative” would mean the 
administrator or executor of a person’s estate; a 
supervising spouse if a court judgment has settled 
the accounts of the estate; or a person designated 
in an endowment agreement, whether or not born 
at the time of such designation, to act in place of a 
party to the agreement for all matters expressed in 
the agreement and all of the actions it 
contemplates, including, but not limited to, 
interpreting, performing, and enforcing the 
agreement and defending its validity; and
●“Property” would mean real or personal property or 
money, cryptocurrency, stocks, bonds, or any other 
asset or financial instrument.
Violations of Donor-Imposed Restriction and Recourse 
(Section 3)
Except when specifically required or authorized by 
federal or state law, the bill would specify that no charitable 
organization that accepts a contribution of property of an 
endowment fund or to an endowment fund pursuant to a 
3- 2170 written donor-imposed restriction could violate the terms of 
that restriction.
Under the bill if the donor-imposed restriction is violated, 
the donor or the donor’s legal representative could file a 
complaint within two years after discovery of the breach of 
agreement. The complaint could be filed in a district court of 
the county where the charitable organization has its principal 
office or place of carrying out its charitable purpose, or in the 
county of residence of the donor. The bill would allow the 
complaint to be filed whether or not the endowment 
agreement expressly reserves a right to sue or right of 
enforcement. A complaint filed under the bill would not be 
able to seek a judgment awarding damages to the plaintiff.
If a court determines that a charitable organization 
violated a donor-imposed restriction, the bill would allow the 
court to order any remedy in law or equity that is consistent 
with and restores, to the extent possible, the donor’s intent as 
expressed by the donor-imposed restrictions and conditions 
in the endowment agreement. 
Remedies would include, but would not be limited to:
●Future compliance with or performance of donor-
imposed restrictions or conditions on the use or 
expenditure of the gifted endowment property;
●Restitution or restoration by the charitable 
organization of property to an endowment fund that 
have been expended or used by the charitable 
organization in contravention of donor-imposed 
restrictions;
●An accounting or the imposition of accounting 
requirements;
●Restoration or a change to a name required by the 
donor-imposed restrictions;
4- 2170 ●Measures to preserve the property and value of the 
endowment fund;
●Modification or release of a donor-imposed 
restriction or reformation or dissolution of the 
endowment agreement as permitted by Kansas 
law; 
●Transfer of property from the endowment fund to 
another charitable organization as directed by the 
donor; or
●Any other remedy available under contract law or 
equity consistent with the charitable purposes 
expressed in the endowment agreement and with 
the charitable purpose of the charitable 
organization. 
The bill would not allow for the court to order the return 
of donated funds to the donor or the donor’s legal 
representative or estate.
Judicial Declaration of Rights and Duties (Section 4)
For an endowment agreement containing donor-
imposed restrictions, the bill would allow a charitable 
organization to obtain a judicial declaration of rights and 
duties as to all of the actions the endowment agreement 
contemplates, including, but not limited to:
●The interpretation, performance, and enforcement 
of the agreement; and 
●Determination of its validity.
The charitable organization would also be able to seek 
such declaration in any suit brought under the bill.
5- 2170 Non-Retroactivity (Section 5)
The bill would state its provisions would not apply to 
modifications or releases of donor restrictions or purposes by 
a final determination of a court or by an institution after review 
by the Attorney General before the effective date of the Act, 
or to any pending appeal of such a final determination of a 
court or action by an institution.
Background
HB 2170, as passed by the House, would have 
amended law concerning samples of products provided to 
retailers and to club and drinking establishment licensees. 
[Note: These provisions were added into HB 2059 by the 
Senate Committee on Federal and State Affairs.] 
The Senate Committee removed the contents of HB 
2170, inserted the contents of SB 133, as amended by the 
Senate Committee, and recommended a substitute bill be 
passed. [Note: The provisions of HB 2170 relating to product 
samples were not retained in the substitute bill.]
SB 133 (Donor Intent Protection Act)
SB 133 was introduced by the Senate Committee on 
Federal and State Affairs at the request of Senator Kloos.
Senate Committee on Federal and State Affairs
In the Senate Committee hearing on SB 133 , 
proponent testimony was provided by two representatives of 
Philanthropy Roundtable, who provided examples of 
instances in which donor intentions were violated, resulting in 
litigation. Proponents expressed that the bill would provide a 
legal pathway for the enforcement of written endowment 
agreements and increase trust between donors and charities.
6- 2170 Written-only proponent testimony was provided by a 
private citizen.
Opponent testimony was provided by a representative 
of the Kansas State University Foundation, who expressed 
concern that the bill would create confusion and be a drain on 
the resources of charitable organizations. The opponent 
stated the bill would conflict with current Kansas laws that 
protect donor intent.
On March 23, 2023, the Senate Committee amended 
SB 133 to:
●Specify that the provisions of the bill apply to a 
endowment agreement that is governing an 
endowment fund containing only property gifted by 
the single, individual donor who sought the 
agreement;
●Amend the definition of “endowment agreement” to 
specify that the agreement would only apply to the 
donor gifting the endowment fund or property to the 
endowment fund;
●Amend the definition of “endowment fund” to 
specify that an endowment fund would contain only 
property gifted by a single donor;
●Add the definition of “legal representative”;
●Change the statute of limitations on filing 
complaints after discovery from six years to two 
years; and
●Specify that the Act is not retroactive.
The Senate Committee removed the contents of HB 
2170 concerning product samples, inserted the amended 
contents of SB 133 concerning the Donor Intent Protection 
Act, and recommended a substitute bill be passed.
7- 2170 Fiscal Information
According to the fiscal note prepared by the Division of 
the Budget on SB 133, as introduced, the Office of Judicial 
Administration indicates enactment of the bill could increase 
the number of cases filed in district court because the bill’s 
provisions would allow for a lawsuit to be filed for violations, 
which would increase the time spent by judges an court 
employees processing and researching these cases. The 
Office estimates enactment of the bill could result in the 
collection of docket fees in those cases filed under the bill’s 
provisions, which would be credited to the State General 
Fund. According to the Office, a fiscal effect cannot be 
estimated until the Judicial Branch has had an opportunity to 
operate under the bill’s provisions. Any fiscal effect 
associated with the bill is not reflected in The FY 2024 
Governor’s Budget Report.
Donor Intent Protection Act; philanthropic gifts; donor-imposed restrictions; charitable 
organizations; endowment funds
8- 2170