Charitable solicitation registration is not optional. It’s the law.
Charitable solicitation is regulated on the state level and the requirements vary by state. Forty-one states require charitable solicitation registration before soliciting donations, regardless of whether funds are actually received. Solicitation can take on many forms of asking for a donation, including fundraising online. Penalties can be severe, so proactively registering and maintaining those registrations is ideal.
Asking for donations by phone, mail, in person, and online are all considered charitable solicitations and subject an organization to registration requirements. In addition, solicitations through professional solicitors, fundraising consultants, and commercial co-ventures or cause marketing trigger registration requirements. With the exception of California, each state requiring registration does so before an organization begins soliciting, regardless of whether donations are received. California allows organizations 30 days to register after receiving assets.
Applications for Registration
State applications generally consist of the state’s specific form, a filing fee, and supporting documents. Applications generally must include the organization’s IRS determination letter, IRS Form 990, and a list of officers and directors, among other items. Fees vary by state and are typically calculated based on total gross revenue in the previous year or amount of contributions received in the state. The application fees range from $0 to over $400 for most organizations.
In many states, certain organizations can be exempt from registration, including those that receive less than a certain amount of contributions annually. Religious organizations, hospitals, and schools can also be exempt. Ironically, exemptions themselves typically require an application and also require renewal on an annual basis. For these reasons, exemptions may reduce an organization’s state fees but do not necessarily limit the time investment needed. Organizations that file exemptions must still determine changing state requirements, prepare applications, track renewals, and monitor fluctuations in annual contributions.
Charitable solicitation registrations must be renewed, typically on an annual basis. Like initial registrations, renewals require an application and supporting documentation. Most states have a separate process and fee structure for charitable solicitation renewals. Organizations can expect to file the most recent financial information with their renewals, which is typically the form 990 and audit. Some states require organizations to provide organizing documents and bylaws each year; however, other states require organizations to submit those documents only once. Each state requires renewal applications to be submitted at different times throughout the year. Five months and fifteen days after the close of an organization’s tax year is a common renewal date. Keeping track of varied due dates is a key component of fundraising registration compliance.
Online fundraising allows organizations to access a broader donor base, which is great; however, it also poses unique challenges. Fundraising online can take many forms including crowdfunding, website “Donate Now” buttons, email campaigns, and social media. Generally speaking, asking for donations via any of these online methods constitutes soliciting in every state and subjects an organization to registration requirements.
Consequences of Failing to Register
State penalties for unregistered solicitation are diverse and can be severe. Soliciting prior to registering, failure to register after receiving funds, filing late renewal applications, or facing complaints filed by the public can all trigger adverse consequences, which can include:
- State fines, late fees, and penalties
- Civil and criminal action against officers and directors
- Revocation of tax exempt status
- Denial of the right to solicit funds
- Negative PR
- Damaged relationships with donors and grantmakers
- Lost donations or grants
Meeting state charitable solicitation requirements is challenging; however, it is necessary. Taking a proactive approach to charitable solicitation registration will help organizations ensure compliance and avoid negative consequences.
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