Some people feel that since they are a nonprofit and doing good for others that they should be given any latitude needed to accomplish their mission. Or, perhaps they just need to apologize and do better next time if they do run afoul of any law or regulation.
After all, you’re doing good. Right? If only it actually worked that way.
Nonprofit regulations continue to grow at both the federal and state levels. And, there are significant penalties for not following these regulations. Those penalties run from financial, to revocation of nonprofit status, to public relations nightmares.
With nonprofit fundraising, regulations vary state-by-state. If you’re so much as posting a “donate now” button on your website, your nonprofit is subject to the rules and regulations of each and every state in the union.
Here’s an overview of what’s required—a sort of nonprofit fundraising compliance 101 course.
Every state has its own regulations and requirements for registering. Of course, you’ll need to register in the state where your nonprofit is located. But you’ll also have to register in every single state where you expect to solicit donations. Meaning if you’re collecting donations on your website, you need to register in every state.
There is an initiative underway to help you file in each state called the Multi-State Filer Project and it’s Unified Registration Statement. They’ve published a list of cooperating states that can prove helpful. At this time only 37 states accept the Unified Registration Statement. And even for those states the fees and the supplemental forms required also vary.
Some states require a registered agent with a mailing address within the state. States can also require that any professional fundraising consultant that you use to be registered in the state.
Others require that you file your IRS 990. Some give notification of your successful registration, while you have to follow up with others to see if your information is posted in their online database. Note too, that much if not all of the information you provide will be available to anyone who requests it. So be careful of providing information that should be confidential.
Most states define solicitation broadly. That covers online “donate now” buttons, of course. But also covers grant solicitation, product sales that have a portion earmarked for contribution, crowdfunding, email, and snail mail. In many states regulations apply whether the solicitation results in a donation or not. Here’s a quick list of solicitations that could require registration:
- Giving days
- Grant proposals
- Phone calls
- Email campaigns
- Website donation buttons
- Fundraising events
- Letters and mail campaigns
- Personal requests for donations
Registrations typically need to be renewed each year. That, in turn, requires submitting the application and supporting documentation such as your recent IRS 990. With varying renewal dates across states, this can be nearly as challenging as the initial registration.
Some charities are exempt from registration in several states. That can include religious organizations, schools, and hospitals. Plus, membership organizations that only solicit their members may be exempt. However, again depending on the state, you may still need to file an application for exemption and renew it each year.
Registration fees alone can run from $1,700 to $3,600, with a few states that have sliding scales for fees based on the organization’s income. You’ll also need to factor in the time and cost of completing the forms by either your staff or a professional firm, as well as the accountant costs for any audited statements needed.
Solicitation Disclosure Statements
Quite a few states also have regulations that require written disclosure statements on all materials mailed to potential donors in their states. You can find a listing of states and their disclosure requirements as well as a model statement at Perlman + Perlman.
Registration Noncompliance Consequences
The consequences of noncompliance include fines, late fees, penalties, and even revocation of tax exempt status. Then there is civil and criminal action against officers and directors. And don’t forget negative public relations and the resulting loss of donations and grants. It’s not a pretty picture but can be avoided by taking care of registration in every state you’ll be soliciting donations.
Donations are based on trust. Trust that your organization will use the funds wisely and in compliance with the wishes of the donor. Registering your fundraising activities with each state is one aspect of that trusting relationship. Donors expect you to do the right thing, to provide complete transparency, and comply with any and every regulation.
We Can Help
We can help you navigate the state-by-state regulations and registration. We've done this for many nonprofits over the years. You can use our experience and expertise to make sure fundraising compliance is covered for your organization.
You can contact us at (855) 329-4327 or firstname.lastname@example.org.