If you have questions, please leave them in the comments.
~ Kivi
You’re Soliciting In Our State. Did We Say “OK?”
If you’re sending donation requests by email then you need approval from officials in states where they land. Ditto if you send appeals through the Postal Service. If you have online giving then there are a bunch of states that must say “OK” before your “Donate Now” button goes live.
These are all examples of solicitations under the Charity Registration laws. Under these laws-which, sadly, differ in each state-your non-profit must have approval before it can conduct its solicitations. In some states, like Florida, Arizona and Pennsylvania, there are criminal penalties with fines for non-compliance. There are civil penalties in California, New York, Illinois and many others. Under principles of fiduciary liability, your board members can be liable for your organization’s criminal or civil wrongdoings.
On top of all this the IRS has stepped in. The new Form 990, which non-profits raising over $25,000 must file annually, asks two questions about your compliance with registration laws in states where you solicit. The 990 is signed by an officer under penalty of perjury.
The definition of ‘solicitation’ varies across the states. In states like Florida, Georgia, Arizona, New Jersey and New York, the mere existence of a website that accepts donations triggers the registration requirement. Add the likes of California, Colorado, Connecticut, Massachusetts, Oregon and Utah if you’re using email, U.S. mail or advertisements to induce their residents to your Donate Now button.
In every state, postal mail, meetings and events that include an appeal for gifts are registration-requiring solicitations. It doesn’t matter how a state looks at your website if you’re dropping mail or meeting people there.
If your organization is small and most of your gifts come from just a few states (or maybe only one), here’s an enormous time-saving tip. Put a disclaimer on your giving page, stating that you only accept gifts from certain states-and name them. That way you don’t have to register in any other state; you’re no longer soliciting in those states. Because I’m risk averse, I recommend going one step further if you use drop down menus. In the state menu, only list the states you’re accepting gifts from.
The best way to get started is by following the adage ‘charity begins at home.’ Register with your home state. I hope you see how this is different than incorporation. It’s also different than registering a charitable gift annuity program if you have one, and if your state regulates gift annuities. This is an additional layer of home-state law for you to comply with.
Next, register in states where you conduct the most solicitations. If you’re strictly doing web based fundraising, with no inducements to your site, start with the most populous state (California) and see if it considers the existence of a website, without inducements, a solicitation. California does not. Continue in the same fashion with the second most populous state, then the third, etc. The Census Bureau is an authoritative source for state population.
If you solicit in other ways, with or without a donation-accepting website, then query your own database. Select those you solicit and pull their state of residence, listing the states in descending order by frequency of constituent. The first state will be the one where you send the most solicitations. Start there and work your way down.
Most states, but, sadly, not all, have exemptions based on charitable mission, gross revenue or in-state revenue. You might be exempt in a good number of states. Be aware that in some states exemptions have to be approved — you can’t just decide you’re exempt and move on. They don’t make this easy.
Plan to do this over 12 to 18 months. There’s no way you’ll be in full compliance immediately. But you’ll be on your way with your most important states, in the right sequence, if you follow the plan I laid out above.
Eventually, you need to be in compliance to protect your non-profit from fines and other penalties, and your board members and officers from liability.
Tony Martignetti, Esq. has been supporting the fundraising needs of non-profits since 1997. He is the author of Charity Registration: State-by-State Guidelines for Compliance and Managing Director of Martignetti Planned Giving Advisors, LLC. His two websites are www.StateCharityRegistration.com andwww.mpgadv.com. You’ll find Tony on LinkedIn, Twitter, and Facebook. To contact Tony, email him at tony@mpgadv.com.
