The new law protects charities from liability for fraudulent donations by shortening the amount of time defrauded investors have to recover their money from charities.
The limit is now two years; it had been six.
Gov. Mark Dayton signed the measure Tuesday. The law is designed to help nonprofits that accepted millions of dollars from Tom Petters and his associates. Petters was convicted of running a Ponzi scheme in 2009 and is serving 50 years in prison.
Returning the money would put charities in a financial bind, said Susie Brown with the Minnesota Council of Nonprofits. Charities took and spent Petters' money in good faith, and forcing them to give it back could put some in dire financial straits, she said.
"These resources are spent. They're gone," Brown said. "To say later that we need to pay the money back puts nonprofits in a very difficult, if not impossible situation, if the money has been long ago spent on mission and programs in the community."
Attorney Doug Kelley, who leads the asset recovery effort, said the law is unfair to victims. Kelley said he may sue to block it because the new law affects litigation already filed.
"When you reach back to lawsuits which were commenced under one set of circumstances in the law and then change the law two years hence, we consider that to be a retroactive clause," Kelley said.