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Charity Website Disclosures

Charity Website DisclosuresIn today’s world of technology and the World Wide Web, almost all charities have a website. If your charity has a website, here are a few tips regarding charity website disclosures that are recommended:

Key Documents

The organization should make the following accessible to visitors of their website:

1) Mission statement of the organization

2) Summary of the organization’s programs

3) Roster of Directors and Officers

4) Link to the organization’s most recent form 990 (minus Schedule B)

5) Summary of finances of the past fiscal year (Annual Report)

Some organizations go for full transparency and may include a copy or link to their organization’s formation documents: Articles of Incorporation, Bylaws, IRS Determination Letter, etc. These documents are not required or necessary to disclose and can subject the organization to other scrutiny by the public and private sector. Therefore, we recommend making them available on the organization’s website only after careful consideration of the pros and cons.

Solicitation Related Disclosures

If the organization’s website includes a donate here button, the organization may be subject to charitable solicitation registration requirements. Many states follow the Charleston Principles but others do not. Therefore, the organization may need to review what state the donor(s) that donate through the webpage come from and determine if registration is required in those state(s). The organization will also need to consider whether it receives contributions from the state on a repeated and ongoing basis or a substantial basis through its website. If so, then the organization either needs to get registered as soon as possible or include a disclosure statement on the donate page to omit donations from residents of those states where the charity is not registered. In addition, the organization should have a link to the state required written disclosure statements regarding registration and location of financial records. If the charity accepts quid pro quo donations on its website, it must also ensure that the disclosures for quid pro quo donations are provided to donors.

Privacy Related Disclosures

Lastly, the organization should have its privacy policy posted. The policy should include the four (4) standards: notice, access, choice, and security.

Following these tips will help charitable organizations create informative, transparent, and compliant websites that communicate a culture of accountability and stewardship to both donors and regulators.

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Form 990 Deadline for Calendar Year Taxpayers

Today, May 15th is an important tax date for nonprofits whose fiscal year ends June 30th or December 31st.  If the organization’s fiscal year ends June 30th, today is the last day to file the federal tax form.

If the tax return is filed late, the IRS imposes late fees based on the organization’s gross receipts ($20 day per day for organization’s whose gross receipts are less than $1 million and $100 per day for organization’s whose gross receipts are more than $1 million).  Failure to file Form 990 for three consecutive years will result in automatic loss of exemption.

If the organization’s fiscal year ends December 31st, the federal tax form is due today.  If the tax form is not ready, the organization should request an extension with the IRS.  This can be completed by submitting Form 8868 – Application for Automatic Extension of Time to File An Exempt Organization Return.  The IRS now grants an automatic six (6) month extension but the form is still required to be filed.

For organizations that have a fiscal year which ends June 30th, September 30th and December 31st, today is also an important date if the organization is registered to solicit in states that follow the IRS deadlines.  Extensions may be requested with the states for organizations with a fiscal year end September 30th or December 31st.  For organizations with a fiscal year end of June 30th, most states will expire, with no further extension, today.  Prepare and submit the application(s) as soon as possible to avoid accruing late fees.

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The Long Arm of Charitable Solicitation Law

DIY Nonprofit LawMust charities register as fundraisers in every state with a registration requirement because their websites are available to users in every state? The Pennsylvania Attorney General thinks so. One IRS official has even queried whether noncompliance with state registration requirements could adversely affect an organization’s tax-exempt status due to a violation of public policy. Echoing this sentiment, the revised Form 990 now asks filers to:

“List all states in which the organization is registered or licensed to solicit funds or has been notified it is exempt from registration or licensing.”

Inconsistent Registration Requirements.

Forty-one U.S. states as well as the District of Columbia and many local jurisdictions require some type of registration for charities trying to solicit funds. These laws create a patchwork of largely inconsistent laws that nonprofits must contend with. To add to the confusion, the jurisdictions that require registration have different definitions and standards regarding who must register, which documents are required, whether nonprofits must renew their registrations, and which government agencies process the registrations.

Typically, state charitable solicitation statutes regulate the following:

  • Charitable Organizations that solicit
  • Professional Fundraisers that plan fundraising campaigns
  • Professional Solicitors that solicit on behalf of charities
  • Charitable Sales Promotions where a company offers to donate a portion of sales proceeds to charity

Many states define “solicitation” extremely broadly. The solicitation does not have to be successful. The mere request often triggers a duty to register.

Unified Registration Statement.

The National Association of State Charities Officials and the National Association of Attorneys General created a form Unified Registration Statement in an attempt to standardize the registration methods across the country. Over 36 jurisdictions accept the Unified Registration form; however, they often differ in their specific requirements.

Charleston Principles.

In an attempt to offer some clarity to the murky legal landscape facing charities and state regulators, the National Association of State Charity Officials (“NASCO”) released non-binding guidelines, known as “The Charleston Principles.” The Charleston Principles attempt to provide guidance to both charities and state regulators regarding the application of state registration requirements to charities soliciting donations over the Internet.

In general, the Charleston Principles attempt to define the type and extent of activity that will trigger the duty to comply with a state’s registration requirements. The following summarizes the key points:

Activities that do trigger a duty to register.

  1. A charity is domiciled in the state and passively or actively solicits contributions over the internet.
  2. A charity is domiciled in the state and its principal place of business is located in that state.
  3. A charity is not domiciled in the state, but its non-internet activity in that state would require registration under existing law.
  4. A charity solicits donations through an “interactive website”; and the charity either:
  • “specifically targets persons” located in the subject state for solicitation; or
  • receives contributions from the state on a “repeated and ongoing basis or a substantial basis” through its website.

5. A charity solicits donations through a non-interactive website, and the charity either:

  • invites further offline activity to complete a contribution; or
  • establishes other contacts with the subject state (i.e., by sending e-mail messages or other communications that promote the site).

Activities that do not trigger a duty to register.

A charity, operating on a purely local basis or within a limited geographic area, does not target states outside its operating area if the charity’s website makes clear that its fundraising focus is limited to that area even if it receives contributions from outside that area on less than a repeated and ongoing basis or a substantial basis.

Practical Approach.

In light of the complexity and expense of registering in every jurisdiction, what should charities who take donations over the Internet do to protect themselves? Some practical suggestions include:

  • Follow the rules of each state for registration, reporting, documentation, etc.
  • Register in your home state and states where you target donors.
  • Register before you start fundraising.
  • Determine the number of contributions from states other than those in which you are currently registered. If contributions from other states exceed cost of registration, register there.
  • Place a disclaimer on your website that donors must be located within certain state(s).

If you are seeking advice regarding fundraising contracts, disclosures and registrations, contact info@caritaslawgroup.com or call us at 602-456-0071.

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Announcement – Ohio Law Change

Ohio Senate Bill 227 has been signed into law and impacts all charitable organizations (domestic and foreign) registered to solicit under Ohio Revised Code section 1716.02.  Effective April 6, 2017, all annual reports with a due date of April 17, 2017, and after may be subject to a $200 late fee if they are not filed in a timely manner. Registration is considered complete when the Annual Report and filing fee, if applicable, has been submitted to the Ohio Attorney General. Any charitable organization that fails to pay the required fee at the time that it is due, shall pay an additional fee of two hundred dollars ($200).  However, the attorney general may waive the late fee if the reason the charitable organization failed to pay the fee timely was beyond the control of the charitable organization

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Top State Charitable Solicitation Registration Myths

Top State Charitable Solicitation Registration MythsForty-five states and the District of Columbia regulate charitable solicitation. Charitable organizations are required to register and submit annual report/registration in forty-two (including DC) of those jurisdictions. Many organizations are not aware that this requirement to register exists and some organizations are under the impression that they are exempt from such requirements. For those that are aware of the registration requirements, there are a number of points that many nonprofits are confused about. For those that were unaware, these points will help create an understanding of the registration requirements and aid the organization in compliance.

  • Exemptions Are Not Automatic. While almost all states grant exemptions from registration for certain types of charitable organizations, each state’s registration requirements will need to be closely reviewed to determine if a particular organization qualifies. In addition, most states require a formal request for exemption, whether it be on a form provided by the state or simply sending a letter with a copy of supporting documents.
  • Some States Do Not Follow the Charleston Principles. A non-exempt charitable organization engaged in any fundraising activities is required to register in each state in which it requests a donation. One method of fundraising that is often problematic for charities is online solicitation – social media, a donate button on the organization’s website, and online cause-related marketing promotions. Whether these types of solicitation trigger national registration or simply registration in a couple of states is a question many charities have. If the organization’s offline activities don’t trigger registration, in most instances, the Charleston Principles can be applied. However, there are now at least 4 states that have defined their registration threshold based on repeated and ongoing basis and/or substantial basis, which would likely trigger registration requirements for online solicitations.
  • Minimum Receipts Thresholds are Based on Charities’ Total Gross Receipts. Another common mistake among charitable organizations is failing to understand the minimum receipts threshold. In most states, charities that raise more than $25,000 dollars are required to register. Many organizations assume the threshold applies solely to receipts within the state. However, the threshold is based on total national revenue as reported on Part I, line 12 of the organization’s Form 990. The only state that has an exemption provision based on amount raised from within its borders is New York. New York exempts a charitable organization that raises less than $25,000 in the state and did not utilize the services of an outside paid fund-raiser.
  • Penalties Can Amount to More than A Financial Penalty. States are increasingly imposing late fees and fines on organizations that conduct fundraising activity without proper registration. In addition to the fines and fees, failing to register can lead to an Assurance of Voluntary Compliance or Settlement Agreement that would need to be disclosed in other states. Failure to register can also lead to investigations that expand beyond the registration issue and that lead to an examination of overall operations.
  • Formal Grant Requests are Solicitations. Many nonprofits seem to think their out of state grant solicitations do not trigger registration requirements. Unless an exemption applies and has been approved by the State, grant applications are solicitations that trigger registration under the law.
  • States Actively Search for Charities that Do Not Comply. Our clients have received notices from the California Attorney General based on grants reported on grant-maker’s Form 990s. All the AG has to do to generate a list of nonprofits that are out of compliance is to cross reference the registration database with Schedule B of Form 990. The growth of electronic filing and information sharing among state regulators and the IRS makes it increasingly likely that the failure to register will be discovered and enforced.

To determine whether your organization needs to register based on its purpose and/or activities and learn more about our registration services, contact us at info@caritaslawgroup.com or call us at 602-456-0071.

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