Fundraising compliance is a complex topic. Forty-four states have laws concerning fundraising, and forty-one states require charities to register to solicit donations.
There are straightforward rules for nonprofits soliciting funds through traditional methods such as phone calls, mailings, and grants. However, online fundraising is a little more tricky.
The advent of social media, email, mobile giving, and “donate now” buttons make it easier than ever for nonprofits to solicit donations online. State lawmakers have not quite caught up to the pace of technology, but they are getting there. While the rules are a bit unclear, there are certain things you need to know if you’re using the internet to solicit donations.
Each state has unique requirements for fundraising registration.
Charitable solicitation registration takes place at the state level, typically with the Attorney General or the Charities Division of the Secretary of State. With each state that requires registration, your nonprofit will submit information on its program activities, fundraising activities, leadership, finances, evidence of IRS exemption, and more. There is typically a registration fee, and most states require you to re-register, or renew, annually.
Using a “Donate Now” button generally triggers registration requirements nationwide.
There are two ways to remain compliant when using a “donate now” button: register nationwide, or only accept donations from states in which you are registered. Many large organizations choose to make the investment in nationwide registration to avoid penalties and increase credibility with potential donors. Smaller organizations often choose to start by registering in their state of incorporation. From there, they can begin expanding to surrounding and larger states that are more likely to be a source of contributions like New York and California.
The Charleston Principles offer guidelines for online fundraising but do not apply in all states.
In 2001, the National Association of State Charity Officials (NASCO) released a set of recommendations for how state charitable solicitation authorities should handle Internet fundraising. The Charleston Principles suggest that registration should be required if a nonprofit has an interactive webpage that allows donors to give, such as a “donate now” button, and either 1) sends targeted emails to someone they know is in a given state, or encourages people in a state to give, or 2) receives contributions from a state on an ongoing, repeated, or substantial basis. Keep in mind that these are guidelines, not law. Some states follow the Charleston Principles, like Massachusetts. Others, like Maine, do not.
You could face fines and penalties for not complying with requirements.
The cost of fundraising registration is easily outweighed by state and federal penalties for noncompliance. Penalties can exceed $5,000 for a single infraction in one state. In some states, directors are personally liable for payment. Besides fines for failure to register or renew, states can revoke your organization’s state tax exemption, and deny your right to solicit in that state altogether.
Fundraising registration can be overwhelming, but being proactive and aware of the requirements is the first step to compliance. Research the requirements in your state and make a plan. By investing in compliance, you stay on the right side of the law, inspire confidence in your donors, and help solidify your nonprofit’s place in the community. For more information on fundraising compliance read this free white paper.
This article was brought to you by James Gilmer. James is a Compliance Specialist for Harbor Compliance, a leading provider of compliance solutions for organizations of all types and sizes. Headquartered in Lancaster, Pennsylvania, Harbor Compliance partners with organizations in every state and over 25 countries abroad to help solve the most challenging compliance problems. With clients that range from the largest organizations in the country to fast-growth startups, Harbor Compliance fully manages government licensing compliance in both nonprofit and business sectors. James is co-founder of Berks Sinfonietta, Inc., a chamber orchestra in Berks County, Pennsylvania.