In most states, before a nonprofit can solicit charitable contributions from the public it must register with the state—typically, with the Secretary of State or state Attorney General. It's easy to overlook this requirement. Case in point: the Donald J. Trump Foundation. According to The Washington Post, Trump's foundation—which is based in New York—failed to properly register in the state.
New York's charitable registration law is typical (another 38 states plus the District of Columbia have similar laws). It requires most nonprofits that collect more than $25,000 in contributions from New York residents to register. The Washington Post said that tax filings show that the Trump Foundation has raised more than $25,000 for each of the past ten years. Although not entirely clear, it's likely that at least some of the foundation's fundraising activities amounted to public solicitations. For example, in early 2016 the Trump Foundation created a website that solicited small donations from the public that it said it would give to veterans. The Foundation said it took in $1.67 million through this website. This kind of Internet solicitation could have triggered the registration requirements not only in New York, but in other states as well.
Additionally, New York law requires registered nonprofits to file an annual financial report with the state; this must be an independent audit by an outside CPA if the nonprofit receives $500,000 or more in contributions. In this kind of an audit, the auditor reviews the nonprofit's books and other financial records to determine whether they comply with accepted standards. According to The Washington Post, the Foundation filed no such statements over the past ten years. Many questions have been raised about the Trump Foundation's activities.
Failure to register a nonprofit can have serious consequences. The nonprofit can be fined and ordered not to solicit any more contributions until it registers. The Attorney General can also obtain a court order requiring the nonprofit to return contributions it received before it registered. State nonprofit registration records are available to the public (usually online), so it's easy for a nonprofit that fails to register to get caught. In the case of the Trump Foundation, the New York Attorney General's office issued an order prohibiting the Foundation from soliciting donations and engaging in any other fundraising activities in New York until it registers with the Attorney General's office and brings its annual financial reporting up to date. According to the order issued by the New York Attorney General against the Trump Foundation: "The failure immediately to discontinue solicitation and to file information and reports . . . shall be deemed a continuing fraud upon the people of the state of New York."
Nonprofit charitable registration can be a confusing, difficult, and expensive process. Larger nonprofits like the Trump Foundation typically hire professional firms to do it for them. Alternatively, there are published guides available to help with the registration process. One of these, Nonprofit Fundraising Registration: Nolo's 50-State Digital Guide, is a digital subscription service that provides detailed summaries of the fundraising registration laws of all states and links to all the forms needed to register or claim an exemption. The Guide is updated four times a year to ensure the information remains current and accurate. For articles and more information on charitable fundraising registration rules, go to the Nonprofit Fundraising Registration section of the Nolo website.