Thirty-nine states and the District of Columbia require nonprofits that are not exempt to register with a state agency before soliciting contributions from state residents. Registration costs time and money. However, not all nonprofits are required to register. All states exempt certain types of nonprofits from their charitable registration requirements.
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, your 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. In addition, in several states, exemptions are not automatic—a nonprofit must have its exemption confirmed by the state charity office. This involves filing an application and providing proof that your nonprofit qualifies for the exemption.
Common exemptions from registration include:
Most states exempt very small nonprofits from registering. In most states “small” is defined by a nonprofit’s gross revenues, not the number of members it has. In many states a nonprofit qualifies for this exemption if it has annual gross revenues of less than $25,000. But the amount varies—from as high as $50,000 in Connecticut to as low as $1,500 in the District of Columbia. Moreover, several states, including California, have no exemptions at all for small nonprofits.
In most states, your nonprofit cannot qualify for the small nonprofit exemption if you use professional fundraisers. That is, all your fundraising must be done by unpaid volunteers. However, the rules vary on this as well. In some states, you can use salaried staff to do some fundraising. In addition, in some states, only nonprofits that are totally unpaid volunteer organizations can qualify for this exemption.
All states exempt churches and other tax-exempt religious organizations from their registration requirements. Indeed, the charitable solicitations laws of many states don’t apply at all to religious organizations.
If a nonprofit is a national or regional 501(c)(3) organization with unincorporated chapters or affiliates in multiple states, the individual chapters may not need to register if they are covered by the national organization’s group registration with the IRS. The parent organization must file a consolidated Form 990 for its subordinate organizations. In some states, however, group registration is available only when the parent nonprofit has its principal office in the state. Of course, the parent organization must register in all states where there are chapters and where money is raised.
Many states exempt nonprofit hospitals and some other types of health organizations from registration. However, the list of health-related organizations that are exempt varies from state to state.
Almost all states exempt educational institutions. The definition of “educational institution” differs from state to state, but most states exempt any type of accredited educational institution. Additionally, many states exempt foundations and support groups established by exempt educational foundations. In some states, this exemption is limited to cases where the institution only solicits funds from its students and alumni, faculty, trustees, and their families.
Many states exempt nonprofits that solicit funds only from their members. These may include fraternal, patriotic, social, or alumni organizations.
About half the states that require registration exempt political parties, candidates for federal or state office, and political action committees that are required to file financial information with federal or state elections commissions.
A majority of states exempt charitable appeals made on behalf of a specific person, provided that the fundraising is conducted by unpaid volunteers. Most states require that all the money collected be handed over to the person, but a few permit some deductions for expenses.
Depending on the state, various other types of organizations may be exempt—for example, nonprofit libraries, museums, historical societies, veterans groups, labor unions, trade associations, nonprofit credit-counseling agencies, volunteer firefighters, ambulance associations, rescue squad associations, and senior citizen centers. Some states even exempt certain named organizations such as the Red Cross, Boy Scouts, Girl Scouts, YMCA, and Junior League.
To determine whether your nonprofit is exempt in any state, you could look up the charitable solicitation laws of that state. Alternatively, to save time and effort you can turn to Nonprofit Fundraising Registration: Nolo’s State-by-State Digital Guide, that contains detailed summaries of the fundraising registration laws of all states, including all available exemptions from registration.