If your nonprofit organization requests donations from residents of any one of the 40 states that require nonprofits to register in order to solicit contributions, you need to know about nonprofit fundraising registration. In the past, nonprofits may have been able to get by while letting these requirements slide, but the IRS and state governments are cracking down. And chances are your nonprofit will be affected by these registration rules, since they're on the books in every state except Delaware, Idaho, Indiana, Iowa, Montana, Nebraska, Nevada, South Dakota, Texas, Vermont, and Wyoming.
Subject to some important exceptions that you should know about, all states other than the 11 identified above require nonprofits that solicit contributions from state residents to register with a state agency. Solicitations can include any type of requests for donations by mail, phone, advertisement, email, or Internet, regardless of whether your nonprofit actually receives any donations. Read on to learn more about state registration requirements for nonprofits. (For tips on fundraising, check out Nolo's article Nonprofit Fundraising Methods: An Overview.)
States That Require Fundraising Registration
|Arizona||Kansas||New Hampshire||Rhode Island|
|Arkansas||Kentucky||New Jersey||South Carolina|
|Dist. of Columbia||Massachusetts||North Dakota||Washington|
Why Register Your Nonprofit?
Until recently, all but the largest nonprofits that solicited contributions nationwide tended to ignore state registration requirements. Indeed, some experts estimate that as many as 90% of all nonprofits failed to register in one or more states even though they were required to do so by state law. Typically, nothing happened because most states lacked the resources and desire to enforce their registration laws.
However, the game has changed. The IRS's recently redone Form 990 now requires nonprofits to provide information about their state registration. Thus, nonprofits need to pay attention to state registration requirements to properly complete their annual IRS information returns. If you don't, you risk unwanted attention and scrutiny from the IRS and states, and potential problems with donors. (To learn more about Form 990, check out Nolo's article Many Nonprofits Must File IRS Form 990-N to Stay Tax-Exempt.)
You don't just have the IRS to worry about. If you don't register in a state where you are required to, you are breaking that state's law. States may impose fines and other penalties on nonprofits that fail to register. These fines can be substantial. For example, Pennsylvania imposes a minimum $1,000 fine for failing to register. Moreover, the state may order your nonprofit to cease soliciting donations within the state until you register there.
How to Register Your Nonprofit with the State
Registration involves filing an application with the appropriate state agency and, in most states, paying a registration fee. You'll usually have to provide financial information with your application. Often, this can be a copy of your most recent Form 990. Registration usually consists of two parts: an initial registration application and an annual renewal/financial reporting requirement.
Unfortunately, there is no single national registration application that works in every state. Instead, your nonprofit must individually register with each state where it is required to do so, following that state's particular requirements. These requirements differ from state to state -- sometimes dramatically -- so the more states you fundraise in, the more registration work you will have. Even the name for registration varies depending on what state you're in -- in some states, it's called a registration statement; in others, it's called a license, solicitation permit, or certificate.
Your Nonprofit May Be Exempt from Registration Requirements
Fundraising registration can be a hassle, but many types of nonprofits are exempted from most states' registration requirements. Most states exempt nonprofit hospitals, educational institutions, religious institutions, and very small nonprofits from the fundraising registration requirement. A few states also exempt nonprofits that receive contributions from less than a specified number of state residents. For example, Michigan exempts nonprofits that receive contributions from ten or fewer people during the year.
If your nonprofit is fortunate enough to fall into one of the exempt categories, your registration burden will be greatly lessened or even eliminated. Unfortunately, determining whether your nonprofit is exempt can be difficult. The list of exempt nonprofits varies from state to state. Thus, a nonprofit can be exempt in one state but not another. For example, a nonprofit that receives contributions under $25,000 per year is exempt from registering in New York, but not in California. This means that you will have to look at the laws of each state to see if an exemption applies to your nonprofit. In addition, in 12 states, exemptions are not automatic -- a nonprofit must have its exemption confirmed by the state charity office.
Can You Register Your Nonprofit Yourself?
Larger nonprofits typically hire law firms or registration specialists to handle their registrations. However, this route can get expensive. You can register your nonprofit yourself, but you will need to understand the registration rules, exemptions, and application process in all the states where you may need to register. For all the information you need to ensure you fundraise legally in every state, get Nolo's book Nonprofit Fundraising Registration: The 50-State Guide, by Attorney Stephen Fishman (Nolo).