Legal Requirements for Nonprofit Fundraising Online or Outside of California

 

Legal Requirements for Nonprofit Fundraising Online or Outside of California

If your California nonprofit solicits charitable donations, it must make sure it is in compliance with state and local fundraising laws, including registration and reporting requirements. Thirty-nine states and the District of Columbia require some form of registration and/or reporting for nonprofits that fundraise or have a physical presence in their state. The registration process provides information about charities to donors in a particular state and to law enforcement to prosecute fraud and misuse of charitable funds.

Where does my organization need to register?

If your charity is incorporated in California, it needs to register in California.  Detailed information about California registration requirements is located here.

For all other states, your nonprofit must determine whether its activities rise to a level to trigger registration requirements. This can happen in two ways:

1.   Physical presence in another state. This may include having an office, property, employees, or program activities in that state.

2.  Conducting fundraising in another state. This asks the question whether the charity has purposefully directed a charitable solicitation to a resident or person located in a particular state. Examples include sending mail or making phone call solicitations to persons in that state or conducting a fundraising event in that state. One email is enough to constitute fundraising in a state.

Notably, the following states do not have fundraising registration requirements (although some require paid fundraisers to register): Delaware, Nevada, Idaho, Montana, Texas, South Dakota, Indiana, Wyoming, Nebraska, Iowa, and Vermont.

If your nonprofit is fundraising overseas, it should contact counsel in the foreign country to determine local fundraising laws and regulations.

What if my nonprofit does all its fundraising online?

According to the Charleston Principles, a set of guidelines established by the national association of state charity officials, whether online fundraising triggers state registration requirements depends on what type of online fundraising a charity is doing:

1. Solely email solicitation:  Email solicitations sent to someone in a particular state are treated the same as a regular mailing if the charity knew or reasonably should have known that the recipient was a resident or physically located in that state. For example, if a charity has the physical address of a member or donor and sends them an email solicitation, the charity is presumed to be fundraising in the state where that person resides.

2.  Interactive website: If a charity has a website that allows for interactive solicitations and donations (such as through a “donate” button), it will need to register with any state in which it either (i) specifically targets people or communities or (ii) receives donations on a repeated and ongoing or substantial basis through its website.

  • Targeting: A website can “specifically target” people in a state if it either (1) includes on its website express or implied references to soliciting donations from that state; or (ii) affirmatively appeals to persons located in that state, such as through advertising or sending messages.

(Charities operating on a purely local basis, or within a limited geographic area, do not target states outside their operating area if their website makes clear in context that their fundraising focus is limited to that area.)

  • Repeated or Substantial Donations: This means receiving donations within a fiscal year that are of a sufficient volume to establish a regular or significant nature. So if a charity has an interactive website and receives 100 donations a year or over $10,000 in donations from a state, it will likely need to register in that state.

3. Non-interactive website: If the charity’s website is not interactive, but it specifically invites further offline activity to complete a contribution or establishes other contacts with the state AND conducts specific targeting or receives repeated or substantial donations (as defined above) from persons in a state, it will need to register with that state.

Are there any exemptions from registration (even though a nonprofit is fundraising in states outside of California)?

Yes. Many states have categories of nonprofits that are exempt from registration. Common examples include:

  • Small nonprofits (with annual gross revenues of $50,000 to $1,500 depending on the state)
  • Religious organizations
  • Hospitals
  • Educational institutions
  • Membership nonprofits

However, what exemptions are available varies from state to state. Your nonprofit will need to confirm whether an exemption applies to it by reviewing the laws and regulations of each state. In addition, in many states the exemptions are not automatic but must be confirmed by the state charities office.

So what does my nonprofit have to do to register?

Every state requiring registration has its own registration form. However, many accept the Unified Registration Statement (see below). Registration generally involves providing information on the organization’s governance and finances. In addition, technically, a nonprofit must register PRIOR to the first solicitation in the state. Fundraising without registration can subject a nonprofit to fines and penalties. However, in practice, states want to encourage charities to register and generally will not penalize a nonprofit for failure to register so long as the nonprofit does not intentionally fail to comply and registers as soon as it becomes aware of the requirement.

The Unified Registration Statement (URS) is an alternative to filing all of the respective registration forms produced by each of the states. Currently it is accepted by thirty-six states and the District of Columbia. Colorado, Florida and Oklahoma are the only states that require registration but do not accept the URS. More information, including the URS itself and any supplemental forms required by cooperating states, is available at the website of the Multistate Filing Project here. The Project is also working on an online portal to allow for online registration filing.

Once we’ve registered, is there anything else we need to do?

Yes! Most states require both registration and annual financial reporting. The annual reporting helps keep state law enforcement advised of the operations, fundraising activities, and finances of charities active in its state. Again, each state has its own form and there is no equivalent to the URS for annual reporting (although one is in the works). Check the website of each state’s charities office for the appropriate form and filing deadline.

Also, if your nonprofit is registered in a state, that means that it is likely subject to the jurisdiction of that state. You will want to be sure to comply with any state or local fundraising laws, including those regulating commercial fundraisers, raffles and bingo, loans to directors and officers, and door-to-door solicitation.

Where can I find out more about registration requirements?

More information is available at the Multi-state Filer Project. Nolo Press also carries a book called Nonprofit Fundraising Registration: The 50-State Guide.

You can also call me for a quote to handle your state registration requirements.

Written by Cameron Holland.