Fundraising and State Registration for Charitable Solicitation
March 29th, 2017
Fundraising is an essential task for nonprofits, big or small, and the ability to raise funds that are tax-exempt is a major motivation for becoming a nonprofit in the first place. Most nonprofits know that they need to register for charitable solicitation in their home state, but are confused about when and in what circumstances they may need to register in other states.
It does not help that each of the 50 states, and the District of Columbia, has its own set of laws and requirements concerning registration – and its own penalties for failing to register before soliciting. For an organization that fundraises in several different states, or at a national level, this means complying with a confusing patchwork of state requirements, with different deadlines, registration fees, exemptions and thresholds for filing, any of which may change from year to year.
Here are some things to consider if you are a leader of a nonprofit that requests or receives money from outside its home state:
- A basic rule of thumb is that if you are receiving or soliciting contributions from donors, by any medium, in another state, you should register with that state.
- If you hire professional fundraisers or consultants, make sure they are registered. Many states have laws requiring registration of professional fundraisers or consultants.
- Some state solicitation laws apply to all nonprofits, not just 501(c)(3) organizations.
- Penalties for failure to register vary from state to state, but can be severe.
- Some states also require organizations to qualify to do business in the state as part of the registration process, and some will require that you appoint an agent to accept service of process when you register.
- If your organization must register in multiple states, you may want to consider using the Unified Registration Statement. Of the 39 states, plus the District of Columbia, that require registration, 31 will accept the URS. Unfortunately, 16 of those states also require other forms as well, and for most states, the URS cannot be used for renewals.
- Be aware that having a website that asks for contributions can trigger registration requirements in a number of states. The National Association of State Charity Officials (NASCO) developed a protocol, the “Charleston Principles”, to help determine when a website gives rise to a responsibility to register. You can look at the document at: http://www.nasconet.org/wp-content/uploads/2011/05/Charleston-Principles-Final.pdf It should be noted that these principles are not binding and at least two states, New York and New Jersey, do not follow them.
- Some states have specific disclosure requirements on fundraising materials.
Because of the complexity of complying with the fundraising registration laws in different states, you should consider professional advice if you are concerned that your nonprofit’s activities require registration. Contact the attorneys at Magill and Rumsey, P.C. at firstname.lastname@example.org or (734)995-2500
Practice Area(s): Non Profit and Tax Exempt