Registering to Fundraise in Each State

You’ve decided to start your own non-profit charity to raise money for a cause you are passionate about. This is great, but there is a vital step you must first take before you can send out your first ask and/or accept the first dollar. You must register to fundraise.

Specifically, a charity must register with their state in order to solicit charitable contributions if state law requires and others where it solicits funds. Currently, there are 39 states and the District of Columbia that have such requirements.1

As each state has its own registration requirements, it is important to research the filing requirements (which change frequently), keep a list of the states in which your organization is registering and how far along in the registration process your organization is, and ensure registration deadlines are met.

Every year thereafter,3 your organization is required to renew its registration with each state in which it is registered and continues to solicit charitable contributions. Most states require a completed renewal form and payment of a fee. Similar to the initial registration, will need a copy of your organization’s most recently filed Form 990, your most recent audited financial statements (if applicable) and in some states a notarized signature on renewal form. A few statesallow renewals through a web site. Each state has a different deadline to renew, and many states will grant an extension to file if requested in writing by the deadline. It is very important to keep a calendar of the deadlines to renew in each state – late fees add up very quickly!

Registering to fundraise in most states requires the following:

  • A completed registration form and payment of a fee
  • The organization’s articles of incorporation and by-laws
  • A list of the organization’s board of directors and officers
  • A copy of the determination letter that the organization received from the IRS
  • The methods the organization intends to use to solicit charitable contributions
  • A copy of the organization’s most recently filed Form 990

Some states also require your organization’s most recent audited financial statements if the revenues exceed a certain threshold, and others require a notarized signature on registration forms. A few states also require your organization to have a registered agent with a valid mailing address within the state in order to register2.

Your organization will receive a letter from each state that approves the registration application. If the application is lacking in some way, the state will send a letter requesting additional information or documentation. Some states require a registered organization to include a specific disclosure regarding its registration with all solicitations for charitable contributions. Smaller organizations without dedicated staff typically outsource registration and renewal.

Overall, remember that your organization needs to register in a state if it solicits charitable contributions in that state. Whether you ask for money by email, over the phone, by mail, in person, through a website or through a fundraising event, these are all considered soliciting charitable contributions.

If you’re unsure if your organization should register with a particular state, reach out to Caritas Registration, LLC at info@caritasregistration.com or by calling (480) 428-3392 today and we’ll help you determine what steps, if any, you need to take to get into compliance.

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1The states that do not require a charity to register to solicit are Nevada, Idaho, Montana, Wyoming, South Dakota, Nebraska, Iowa, Indiana, Texas (unless raising funds for veterans or public safety), Vermont, and Arizona (unless raising funds for veterans). Additionally, none of the U.S. territories have such a law.

2States that require a registered agent with a local mailing address within their state include Michigan and North Dakota. The District of Columbia also requires it. Some states allow the Secretary of State or a key officer to be named.

3Some require renewal bi-annually. These include Georgia and the District of Columbia. Missouri does not require renewal at all. 

4States that allow an organization to renew online include AL, AK, CA, CO, FL, GA, HI, ME, MS, NJ, NM, NY, OH, RI, SC, TN, UT, WA, WI.

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Fundraising in the New Normal

If your annual gala, donor breakfast, or poker night benefit is responsible for more than 30% of your annual operating costs, it may be time to overhaul your organization’s fundraising plan. COVID-19 has taught us many lessons, one of which is that the unexpected can and does happen. Limitations on in-person gatherings have shuttered many key fundraising events heavily relied on by nonprofits. In the aftermath, some are now struggling to keep their doors open.

The good news is that there’s never been a better time to go virtual. We now have the tools and technology at our disposal to effectively pivot fundraising efforts to a wholly online or hybrid platform. Along with this shift comes the potential to expand our reach indefinitely without the inhibitions of locality-based events. And virtual fundraising opportunities can create even more touchpoints of opportunity to tell your story and steward supporters but fundraising online also comes with new responsibilities such as registration.

Virtual Fundraising Options

Microphilanthropy. The rise of social media together with improvements in financial technology has given rise to the surging popularity of micro philanthropy, or donations between $0.25-$10 received at scale over time to accumulate serious cash. According to GoFundMe, Gen Xers and Millennials composed nearly 50% of givers through the platform in 2017, with 68% percent of funds raised from donations of $50 or less. generation of givers looking for a closer relationship between their activities and the causes they care about.

Virtual Events. Events such as auctions, galas, and luncheons can successfully be moved to an online platform. High-quality tech tools, along with thoughtful planning of all the details that make for an engaging and memorable event (like shipping party favors and champagne to participants) can help nonprofits maintain relationships with current donors and win over new ones.

Peer-to-Peer. Did the Komen foundation throw up their hands and shutter their doors when COVID put the brakes on their iconic walk for the cure? Rather than cower in the face of change, they took the walk virtually, touting their new slogan “Walk Where You Are.” Participants are encouraged to walk their neighborhood on the official day of the challenge. A custom mobile app, that includes messaging functions, activity challenges, and virtual badges and medals for participation, allows participants to replicate the camaraderie and excitement of the in-person event.

Merchandise Sales. Print-on-demand providers, such as Bonfire, can make merchandise sales a no-fuss and low-risk fundraising opportunity. Not only do merchandise sales help pad your nonprofits’ coffers, but wearable or highly visible merchandise serves a double-packed punch by increasing your visibility to others. Many merchandise vendors also serve as an online storefront for your wares, further expanding the reach of your nonprofit’s message and fundraising efforts.

Key Steps for Taking Fundraising Online

If you want to pivot your fundraising efforts to take advantage of new virtual opportunities, you’ll want to take a few preliminary steps before launching your first event.

Make a Plan. What are your fundraising goals and objectives and how can you really leverage virtual fundraising opportunities to meet these objectives?

Prepare. Before launching your virtual fundraising event or strategy, you’ll want to make sure you have the right tools, technology, and staff in place to do so successfully. Considerations may include a good online giving platform, effective mobile giving tools, a robust but useable CRM or client relationship management system, marketing software, an optimized website, and adequate staffing and training in using these tools.

Get Registered. If you are soliciting online donations, it’s highly likely that you will need to register in any state in which you solicit donations. Forty states and the District of Columbia require a “charitable solicitation registration” in advance of engaging in any fundraising or solicitation activity. Failure to register can result in fines and penalties against directors and officers and even being barred from further fundraising activities within a state. Caritas Registration can help with your charitable solicitation registration needs. Contact us at cynthia@caritasregistration.com for an estimate. Caritas Law Group serves nonprofits of all types and sizes and files registrations in all states that require them.

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New Jersey Charitable Solicitation Law Update

According to the Center for Non-Profits, the state association of nonprofits in New Jersey, effective May 1, the  New Jersey Division of Consumer Affairs is requiring all annual charities registration renewals and extension requests to be filed through a state-run online portal. New Jersey requires most charitable organizations that solicit funds in the state to register and file annual financial reports. There are exceptions for small organizations that raise less than $10,000 annually and do not use a professional fundraiser, religious organizations, and educational organizations. The Center for Nonprofits has asked the Division to revert to accepting paper filings due to concerns about the online portal, including vague instructions, lack of available context-sensitive assistance, limited responsiveness to inquiries, difficulty in locating and uploading information, recordkeeping and processing backlogs at the Charities Registration office which can prevent access to key areas of the portal, and that it fails to meet the statutory requirement to incorporate Form 990 information by reference.

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Alabama Fundraising Regulation Update

If your organization (professional fundraiser, professional solicitor or commercial co-venturer) is registered with the Alabama Attorney General to solicit charitable contributions, on-going compliance can now be fullfilled through the new online portal effective immediately.  Renewal applications, contracts, bonds and other documents can be uploaded directly onto the site.  This site also accepts credit or debit cards to process payment.  Paper forms and checks will no longer be accepted for registration processing in Alabama. Annual registration is still due every year on or before September 30th.

Commercial co-venturers registering for the first time with the Alabama Attorney General must complete the application online.  Similarly, professional fundraisers registering for the first time must complete the application online online.

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Arkansas Charitable Solicitation Law Update

As of January 1, 2018, registration for charitable solicitation moved from the Arkansas Attorney General to the Arkansas Secretary of State.  The revised forms can be accessed at the Secretary of State’s website.

Further, the state changed its registration renewal deadline from May 15th (for calendar year groups) or 6 months (for organizations with a fiscal year other than calendar) to August 1st for all organizations.   The Secretary of State will honor any deadlines (extensions) previously granted for the first year of this transition.

A charitable organization that requires additional time to submit its renewal can still request a six (6) month extension which may be granted for good cause shown.   The extension request should be emailed to charities@sos.arkansas.gov.  In the subject line include the words “Annual Financial Report Extension.”   A copy of the IRS Application for Automatic Extension of Time to File an Exempt Organization Return (form 8868) may be sent along with the extension request but is optional.  The extension request can also be mailed to the SOS office.

The filing fees and deadlines for Fundraising Counsels and Paid Solicitors remain the same.

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Welcome Changes to Pennsylvania Fundraising Laws

On December 22, 2017 the Governor of Pennsylvania signed two bills into law amending the Solicitation of Funds for Charitable Purposes Act.  The new laws go into effect February 20, 2018.

Act 71: Under prior law, Pennsylvania required registered charities with gross annual contributions of $300,000 more to have an independent CPA audit the organization’s financial records. This was one of the lowest audit thresholds in the country. The new law does not require an independent audit until the registered charity’s  gross annual contributions meet or exceed $750,000. This will save many small charities thousands of dollars in audit fees that would not otherwise incur. Still, the higher threshold for independent audits does not mean that registered charities do not have to submit financial information. The new thresholds and requirements for financial reports required for charities registered to fundraise in Pennsylvania are as follows:

Less than $100,000: internally prepared, compilation, review, or audit
$100,000 to less than $250,000: compilation, review or audit
$250,000 to less than $750,000: review or audit
$750,000 or more: independent audit

 

Act 72:  To help charitable organizations comply with registration deadlines and, possibly, eliminate late filing fees, the annual registration statement will be considered timely filed if the renewal is postmarked on or before the deadline rather than by the date received by the Bureau. This aligns the Bureau’s filing requirements with the “mailbox rule” followed by the IRS and most other regulators.

This Act also provides the Bureau with more time to review and process registration filings submitted by charities, solicitors and fundraising counsels.  The number of days the Bureau has to review the filings has increased from 10 to 15.

Both laws will be applied to all registration renewals due February 15, 2018 and thereafter beginning with organizations whose fiscal year ended 3/31/2017 and has not yet refiled with the Bureau.  For organizations that are filing an initial application, the changes will apply for organizations that file on or after February 20, 2018.

Lastly, the Bureau revised the Charitable Organization Registration Statement and the Instructions.  Check the website (http://www.dos.pa.gov/BusinessCharities/Charities/Pages/default.aspx) for the August 2017 revised form which promises to be shorter and more user-friendly.

 

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Fundraising – When to Seek Permission

Fundraising to carry-out a nonprofit’s charitable purpose is necessary for the survival of the organization.  However, holding a 501(c)(3) tax exemption does not give unlimited permission to fundraise.  Many nonprofits are unaware of charitable solicitation laws within their own state much less other states where they may be asking for and/or receiving contributions.

Nonprofits that solicit donations or funds (directly or indirectly) must register in its home state if its home state requires registration. Nonprofits may also be required to register outside of their home state depending on where the donors its solicitations are reaching reside the amount and frequency of donations. Examples of fundraising that could trigger the duty to register include the following:

Traditional Fundraising

Traditional fundraising techniques include direct mail, telephone solicitation, door-to-door fundraising, individual asks, special events, grant applications, and corporate solicitations. If a nonprofit conducts any of these direct methods of fundraising, it must register in its state of domicile and any state its solicitation is targeted to reach if those states regulate fundraising.  Some states may not require an organization that solicits grants solely from foundations and governmental units to register if that is the only method in which it solicits donations in the state.

Media Fundraising

Fundraising through radio, television, newspaper and magazine ads raises special compliance considerations. If the solicitation is distributed or aired locally or regionally, the organization must register in each state where the residents of such state can encounter the broadcast or periodical.  If the advertisement or program is distributed or aired nationally, the organization must register in all states that require registration.

Internet Fundraising

Internet fundraising includes solicitations delivered via email, a website, or social media. While email is digital and included in the list of Internet based fundraising methods, for registration purposes email is treated like direct mail.  Therefore, the organization would be required to register in the state(s) where the individual(s) receiving the email is located.

For online solicitation mediums such as having a donate now button on the organization’s website or the website of a fundraising intermediary, or being the beneficiary of a social media or crowd funding promotion, registration may be required.

Some states follow the Charleston Principles which offers a guideline based on repeated, substantial or ongoing donations received through these methods.  However, the organization may be required to register with those states that have not adopted the Charleston Principles and where it has met the Charleston Principals repeated, substantial or ongoing donations test. If the organization receives an unsolicited donation via a donate button on its website it may not trigger a duty to register in states that follow the Charleston Principals. However, once the organization takes that individual’s contact information and sends a request for a follow-up gift, that is considered a solicitation and triggers state registration requirements.

Auctions, raffle/bingo, vehicle, cause-related marketing

Many states restrict raffles, bingo and other forms of gaming. Violations of gaming laws can result in criminal liability. Some states offer exceptions for nonprofits but the rules must be strictly adhered to. Many such states require nonprofits engaging in gaming activities to obtain state and local licenses.

Contracts with Professional Fundraisers

If the nonprofit organization engages professional fundraisers (Professional Solicitor, Professional Fund-Raising Counsel, Commercial Co-venturer) to assist with fundraising or strategy for any of the methods listed above, the nonprofit and the professional fundraiser may both be subject to filing requirements depending on the state and type of assistance provided. For more information, see our blog post on Working with Professional Fundraisers.

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Working with Professional Fundraisers

Donations are the lifeblood of most charities and therefore maintaining the right to fundraise in various states is of critical importance. While many charities know they must maintain their own state registrations to protect their ability to fundraise, they aren’t always as vigilant when it comes to working with professional fundraisers.

Professional fundraisers are regulated in many states where they are also known as professional solicitors, professional fund-raising counsel and commercial co-venturers. Once a fundraising contract is executed, both parties have an obligation to disclose the relationship in the states where fundraising will occur based on services being provided. If both parties are registered and the contract has all the required information, the contract should be accepted and charitable solicitations may commence upon acceptance.

However, from time to time, a charity may receive a notice that the professional fundraiser is not properly registered or current with its registration or vice versa.  The notice will state that fundraising in the state must cease until the unregistered party obtains or renews its license.  The unregistered party will receive a separate notice notifying them of the need to register or submit a renewal application.

If the fundraiser does not register and the charity, knowingly, continues to use their services to solicit in the state they received a notice from, both the charity and the fundraiser can be subject to fines and consent agreements which they would be required to disclose in other states.  Depending on the severity of the violation, a state can impose more severe penalties.  For example, a charity can have its registration exemption revoked (if it is on record as an exempt organization from registration), fined, or required to return funds received during the period of non-compliance.

We recommend both the charity and the professional fundraiser include language in their contract requiring each party to comply with state law in the applicable states and to make the failure to keep each other updated on changes to the status of their registration a basis for termination of the agreement.

It is important to remain in communication throughout the contract term with regard to the status of registrations – especially when preparing for a campaign.  Coordination to ensure both parties are properly registered can prevent loss of revenue, for example, in printing for a direct mail campaign and/or avoid financial penalties if caught unregistered.

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North Dakota Annual Report for Charitable Solicitation

North Dakota’s Charitable Solicitation Annual Report is due September 1.  The Annual Report can be obtained online at http://sos.nd.gov/business/nonprofit-services/charitable-organizations-soliciting-contributions/required-solicitation-reports.  Note that North Dakota does not require a copy of the organization’s tax return.  If your organization’s fiscal year ends between June 1, 2017 and September 1, 2017, a three (3) month extension can be requested by submitting the state extension form.  If your organization follows any other fiscal period, it must file by the deadline or pay the late fee.

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Registration Strategies for Small Nonprofits

Yes, charitable registration laws really do apply to small charities. Many states have minimum fundraising thresholds, but those thresholds generally apply to funds raised by the organization nationwide, not in that specific state (a common misconception!). Therefore, unless your charity is so small as to be practically non-existent or fits into another common exemption (e.g., churches), it is still likely required to register in most states with registration requirements.

One approach for small organizations with online fundraising operations is a strategic registration. A strategic registration requires the charity to review its fundraising and determine where it is currently soliciting. Next, the charity must determine which states regulate fundraising and whether the states in question have exemptions that may apply. Based on that analysis, the charity can then register in only those states.

Further, if the charity has a “Donate Here” button on its website, several states refuse to follow the Charleston Principles and  interpret that as a solicitation in their state. Accordingly, the charity should either state on its website that the solicitation is not directed toward residents of those states or it should register in those states.

Donations that come in from states where the charity is not soliciting do not trigger registration. Its the solicitation that triggers the requirement to register, not donation. However, any good fundraiser worth his or her salt will want to follow-up and ask for more. At that point, the charity is once again soliciting in a new state and will have to evaluate whether it needs to register.

The key to making strategic registration work  is staying on top of solicitations and ensuring that registration requirements are considered whenever solicitations are directed to a new state.

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