Raise money for your nonprofit without IRS trouble!
Your nonprofit needs financial support, which means that you're most likely dependent on the kindness of donors to fill your coffers. If your nonprofit plans to solicit funds from out-of-state donors by phone, letter, email, on the web, or in any other manner, it's essential to fill out IRS Form 990 so that your organization stays legal.
Nonprofit Fundraising Registration is your 50-state guide to the complex and varied registration requirements you'll need to meet while fundraising for your nonprofit. Learn how to keep your 501(c)(3) status when you're collecting cash, including:
- exemptions from registration
- how to register in different states
- initial and annual filing requirements
- rules for professional fundraisers
- other crucial information your organization needs to legally fundraise outside of your home state
You can't afford to overlook registration requirements -- use Nonprofit Fundraising Registration
, your plain-English guide, to keep your nonprofit status in the eyes of the IRS. Plus, get the background information you need and get a line-by-line tutorial for the Unified Registration Statement, contact information for each state, and instructions on filing requirements for each state.
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The book includes the Unified Registration Statement (URS), a registration application form accepted in 36 states. It also includes the state-specific supplemental forms that must be filed with the URS in thirteen states.
- The Unified Registration Statement (URS)
- Arkansas: Consent for Service, Charitable Organizations
- District of Columbia: Basic Business License Information: Charitable Solicitation
- Georgia: Georgia Charitable Solicitations Act, Charitable Organization Registration
- Kansas: Charitable Solicitation Financial Statement
- Maine: Charitable Solicitations Application
- Minnesota: Supplement to Unified Registration Statement for Charitable Organization Initial Registration and Annual Reporting
- Mississippi: Charitable Organization Registration
- North Dakota: Charitable Organization Registration Statement
- Tennessee: Summary of Financial Activities of a Charitable Organization
- Utah: Supplement to Unified Registration Statement
- Washington: Washington State Unified Registration Statement Addendum
- West Virginia: Unified Registration Statement Supplement
- Wisconsin: Affidavit in Lieu of Annual Financial Reporting
- Wisconsin: Affidavit of Organization Which Solicited Contributions Solely in One Community and Received Less Than $50,000 in Contributions
- Wisconsin: Wisconsin Supplement to Financial Report on Form Other Than Form #308
Stephen Fishman is the author of many Nolo books, including Deduct It! Lower Your Small Business Taxes, Every Landlord's Tax Deduction Guide, Tax Deductions for Professionals, and Home Business Tax Deductions: Keep What You Earn--plus many other legal and business books. He received his law degree from the University of Southern California in 1979. After time in government and private practice, he became a full-time legal writer in 1983.
Visit Stephen's profile on Google+
1. State Regulation of Nonprofit Fundraising
- Charitable Solicitation Laws—The Basics
- Registration Requirement
- Exemptions from Registration
- Annual Financial Reporting
- Unfair and Deceptive Practice Provisions
- Disclosure Statements
- Rules for Professional Fundraisers, Solicitors, and Consultants
2. An Overview of the Fundraising Registration Process
- Who Needs to Register?
- Who is Exempt From Registration?
- Why Register?
- When Should You Register?
- Where Must You Register?
- How Do You Register?
- Formulating a Registration Plan
- Minimizing Your Registration Requirements
3. The IRS and State Registration
- Filing IRS Information Returns
- The New Form 990
- The New Form 990-EZ
- IRS Penalties for Filing Inaccurate Forms
4. Internet Fundraising and Registration: A Match Made In Hell
- Website Fundraising—What Are the Boundaries?
- Some Guidelines to Follow—The Charleston Principles
- Crossing State Lines by Email
- Using Charity Portals to Receive Donations
- Soliciting Through Online Social Networks
5. The Unified Registration Statement
- The Uniform Registration Statement
- The URS Registration Process—Step by Step
- How to Complete the URS
6. Qualifying to Do Business Out of State
- What is “Qualifying to Do Business”?
- Fundraising Registration Can Trigger Qualification Requirement
- Intrastate Versus Interstate Business
- The Mechanics—How You Qualify
- What If You Fail To Qualify to Do Business?
State-by-State Rules for Registration
- District of Columbia
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- West Virginia
Supplemental State Forms for the URS
- The Unified Registration Statement (URS)
- Arkansas Consent for Service, Charitable Organizations
- DC Basic Business License Information: Charitable Solicitation
- Georgia Georgia Charitable Solicitations Act, Charitable Organization Registration
- Kansas Charitable Solicitation Financial Statement
- Maine Charitable Solicitations Application
- Minnesota Supplement to Unified Registration Statement for Charitable Organization Initial Registration and Annual Reporting
- Mississippi Charitable Organization Registration
- North Dakota Charitable Organization Registration Statement
- Tennessee Summary of Financial Activities of a Charitable Organization
- Utah Supplement to Unified Registration Statement
- Washington Washington State Unified Registration Statement Addendum
- West Virginia Unified Registration Statement Supplement
- Wisconsin Affidavit in Lieu of Annual Financial Reporting
- Wisconsin Supplement to Financial Report on Form Other Than Form #308
State Regulation of Nonprofit Fundraising
Fundraising is the lifeblood of all nonprofits. Without gifts from donors, most nonprofits would cease to exist. Fortunately, Americans have proven to be generous givers. In 2008 alone, nonprofits raised over $307 billion in donations, including over $229 billion from individual donors. Not surprisingly with so much money at stake, there are many laws and government agencies that regulate nonprofits. First and foremost among these is the IRS, which is in charge of granting nonprofits their exemption from federal income taxes and making sure that they follow federal tax rules.
However, while the IRS’s role is vital to all nonprofits, it is not the only player in the nonprofit regulation game. All states have nonprofit corporation laws governing nonprofit corporations organized within their state. States also have consumer protection laws intended to protect the public from all forms of fraud, including fraudulent fundraising by nonprofits and professional fundraisers.
This book deals with a particular subset of state nonprofit laws related to fundraising by nonprofits. Thirty-nine states and the District of Columbia have enacted laws—often referred to as “charitable solicitation acts”—that specifically regulate fundraising by nonprofits and the professional fundraisers they hire. These laws are primarily intended to protect donors from fraud by nonprofits in their fundraising efforts. They require nonprofits to register with a state agency before engaging in any fundraising activities in that state and to file periodic reports with the state. They also prohibit fraudulent or deceptive fundraising practices, regulate professional fundraisers, and impose penalties for violations.
Clearly, there is a need to protect the nonprofit community, particularly donors, from abuses related to how money is raised. While most nonprofits are legitimate and deserve to be generously supported, according to the Federal Trade Commission, 1% of all charitable donations are misused or collected using fraudulent or deceptive practices. That amounts to over $3 billion every year. In addition, because of the obligations imposed on nonprofits by these fundraising laws, it is crucial for nonprofits to understand and comply with them before engaging in any fundraising in a state that has a charitable solicitations act.
Need additional information on other laws affecting nonprofits? For information on IRS tax laws that affect nonprofits and their tax-exempt status, see Every Nonprofit’s Tax Guide, by Stephen Fishman (Nolo). For more on consumer protection and other state laws regulating nonprofits, contact your state’s charity regulator. A list of state charity offices can be found at the National Association of State Charity Officials website at www.nasconet.org/documents/u-s-charity-offices.
Charitable Solicitation Laws—The Basics
All nonprofits should have a basic understanding of the charitable solicitation laws of every state where they plan to solicit donations. These laws impose registration and periodic filing requirements on nonprofits that solicit contributions in that state and regulate certain fundraising-related activities. Charitable solicitation acts vary from state to state, which can make this a difficult task for a nonprofit that fundraises in numerous states. In the hopes of creating some uniformity among states, two national organizations, The National Association of Attorneys General (NAAG) and the National Association of State Charity Officials (NASCO), created A Model Act Concerning the Solicitation of Funds for Charitable Purposes. You can download a copy of the model act from the NASCO website at www.nasconet.org.
Most states included the basic provisions from the model act when they created their own solicitation laws. Reading through the model act will provide a good overview of what most state solicitation acts look like. However, most states also included their own variations in the law and define key elements of the act differently. For example, while all states require nonexempt nonprofits to register with the state charity agency, the type of financial information that must be disclosed varies from state to state—some states require audited financial statements, while others do not.
State Solicitation Acts Apply to All Nonprofits—Not Just 501(c)(3) Organizations
State solicitation acts regulate fundraising activities by all types of tax-exempt nonprofits. Nonprofits that obtain their tax-exempt status under Section 501(c)(3) of the Internal Revenue Code are the most common type of tax-exempt nonprofit. They include organizations like the Red Cross and United Way and a myriad of others that perform charitable work and whose activities are also heavily regulated by the IRS because of their tax-exempt status. However, there are 27 types of tax-exempt nonprofits other than 501(c)(3) organizations. Unless they are specifically exempted, the state charitable solicitation rules apply to these organizations whenever they solicit donations from the public for educational, philanthropic, humanitarian, scientific, patriotic, social welfare or advocacy, public health, environmental conservation, civic, law enforcement, public safety, or any other charitable purpose.
The most common of these non-501(c)(3) organizations are social welfare organizations which must be operated exclusively to promote social welfare. These include, for example, volunteer fire companies, homeowners associations, and advocacy organizations such as the League of Woman Voters. Other types of nonprofits include membership organizations created primarily to benefit their members such as social and recreational clubs, business leagues (chambers of commerce), fraternal organizations (college fraternities or membership lodges), cooperative organizations, and credit unions.
When we use the word “nonprofit,” we are referring to all types of nonprofit organizations.
States With Charitable Solicitation Acts (cont’d)
States With Charitable Solicitation Acts
Alabama Code §§ 13A-9-70 and following
Alaska Statutes §§ 45.68.010 and following and 9 Alaska Administrative Code § 12.010
Arizona Revised Statutes §§ 44-6551 and following
Arkansas Code Annotated §§ 4-28-401 and following
California Government Code §§ 12580-12599.7; California Code of Regulations, Title 11, §§ 300-307; 311; 999.1
Colorado Revised Statutes §§ 6-16-101 through 6-16-104
Connecticut General Statutes §§ 21a-190a, and following
District of Columbia Code Annotated §§ 29-301.01 and following
Florida Statutes §§ 496.402 and following
Georgia Code Annotated §§ 43-17-1 and following
Hawaii Revised Statutes §§ 467B-A and following
760 Illinois Compiled Statutes §§ 55/1 and following
Kansas Statutes Annotated §§ 17-1760 and following
Kentucky Revised Statutes Annotated §§ 367.650; 367.657 and following
Louisiana Revised Statutes Annotated §§ 51:1901-1902; Louisiana Administrative Code, Title 16, Part III, § 515
Maine Revised Statutes Annotated, Title 9, Chapter 385, §§ 5001-5018
Maryland Annotated Code, Business Regulation Article, §§ 6-101 through 6-205; §§ 6-401 and following
Massachusetts General Laws Chapter 12, §§ 8e and 8f; Chapter 68, §§ 18 through 35
Michigan Compiled Laws §§ 400.271 through 400.292
Minnesota Statutes Annotated, §§ 309.50; 309.515; 309.52; 309.53
Mississippi Code Annotated §§ 79-11-501 through 79-11-511
Missouri Revised Statutes, Title XXVI, §§ 407.450 through 407.462
New Hampshire Revised Statutes Annotated, Title 1, §§ 7:21 through 7:32b
New Jersey Statutes Annotated §§ 45:17A-18 and following
New Mexico Statutes Annotated §§ 57-22-1 and following
New York Executive Law, Article 7a, §§ 171-a through 177, Not-For-Profit Corporation Law §§ 101 and following
North Carolina General Statutes §§ 131 F-2 through 131f-8
North Dakota Century Code, Chapter 50-22
Ohio Revised Code Annotated §§ 1716.01 and following, Ohio Revised Code §§ 109.23 through 109.32
Oklahoma Statutes Annotated §§ 18-552.1 through 18-552.6
Oregon Revised Statutes Annotated, Volume 3, §§ 128.610 and following
10 Pennsylvania Statutes, Chapter 4B, §§ 162.1 through 162.7
Rhode Island General Laws §§ 7-6-1 and following
South Carolina Code Annotated §§ 33-56-10 and following
Tennessee Code Annotated §§ 48-101-501 and following
Utah Code Annotated §§ 13-22-1 through 13-22-15; Utah Administrative Code, Rule R152-22-1 through R152-22-5
Virginia Code Annotated §§ 57-48 through 57-61.1; Virginia Administrative Code, Title 2, §§ 5-610-10 through 5-610-40
Washington Revised Code Annotated §§ 19.09.020 and following; Washington Administrative Code §§ 434-120-100 through 434-120-175
West Virginia Code §§ 29-19-1 through 29-19-6
Wisconsin Statutes §§ 440.41-440.42; Wisconsin Administrative Code, Chapter RL 5
Notes: Idaho and Vermont have charitable solicitations laws, but they do not require nonprofits to register with the state. Texas only requires public safety, law enforcement, and veterans’ organizations to register.
Delaware, Indiana, Iowa, Montana, Nebraska, Nevada, South Dakota, and Wyoming have no special charitable solicitation statutes and no registration or reporting requirements for charitable organizations engaged in fundraising.
Now let’s look at some of the key provisions that are found in most state solicitation acts.
The cornerstone of state charitable solicitation laws is the requirement that nonprofits must register with a state agency—typically the secretary of state or state attorney general—before soliciting donations from that state’s residents. The details on when you must register and what is involved in the registration process are covered in Chapter 2, “An Overview of the Fundraising Registration Process.”
Requiring out-of-state nonprofits to register is intended to accomplish two main purposes:
give the public easy access to important information about charities soliciting donations in their states, and
provide useful information to the state agencies that are responsible for protecting the public from fraudulent fundraising practices.
Much of the information required in the state registration process is already provided to the IRS and is readily available on private websites such as GuideStar. However, by making these disclosures a legal requirement under state law, the states can hold nonprofits and their professional fundraisers liable if they lie or omit information. This gives nonprofits a strong incentive to provide complete and accurate information.
Public Access to Information
A donor needs accurate and current information to assess a charitable organization and determine if it is worthy of a donation. State registration laws require soliciting nonprofits to disclose important information about their finances, including the amount they spend on professional fundraising; the backgrounds of their directors, officers, and employees; the nature of their activities; and whether the organization has been in trouble in the past.
In many states the registrations are available online so donors can check them before giving money and decide if the organization looks like a legitimate charity and if they approve of how it spends its money—whether it goes primarily to its stated charitable purpose or if too much goes to administrative or fundraising or other costs.
Help for Law Enforcers
Registration information also helps state law enforcers to bring enforcement actions against nonprofits that flout the law. For one thing, state fundraising registrations let the state charity agency know that a nonprofit is soliciting, or intends to solicit, in the state. The registration has the current names and addresses of an organization’s directors and officers, as well as those who are responsible for maintaining custody of donated funds. It also discloses the identities of professional fundraisers employed by nonprofits.
Exemptions From Registration
All states exempt certain types of nonprofits from registration. These usually include educational institutions, hospitals, religious entities, and organizations with limited annual income. However, the definitions for each of these organizations vary greatly from state to state, so an organization that is exempt in one state may not fall within another state’s definition of exempt. We go over each state’s exemption requirements in Appendix A.
Annual Financial Reporting
In all states, annual financial reporting is coupled with the registration requirement. Indeed, in most states the two are combined—that is, both are filed together at the same time. The financial report contains detailed financial information on the organization including its balance sheet, statement of support, revenue, expenses, and statement of functional expenses broken into program, management, and general categories. In most states, the annual financial reporting requirement can be satisfied by providing a copy of the organization’s completed and filed IRS Form 990 or 990-EZ for the prior year. However, in some states, larger nonprofits are required to file audited financial statements. These statements, prepared by an independent certified public accountant, may be more reliable than the self-reported amounts on Form 990 or
990-EZ. Annual financial reporting requirements for all states are covered in Appendix A.
Unfair and Deceptive Practice Provisions
State solicitation acts contain provisions prohibiting the use of any unfair or deceptive acts or practices when soliciting charitable donations. Here is the list of banned practices contained in the Model Charitable Solicitations Act, which many states follow (to some extent):
using any unfair or deceptive acts or practices
using any representation that implies the contribution is for or on behalf of a charitable organization, or utilizing any emblem, device, or printed matter belonging to or associated with a charitable organization, without first being authorized in writing to do so by the charitable organization
using a name, symbol, or statement so closely related or similar to that used by another charitable organization that the use thereof would tend to confuse or mislead a solicited person
misrepresenting or misleading anyone in any manner to believe that the person on whose behalf a solicitation or charitable sales promotion is being conducted is a charitable organization or that the proceeds of such solicitation or charitable sales promotion will be used for charitable purposes if such is not the fact
misrepresenting or misleading anyone in any manner to believe that any other person sponsors, endorses, or approves such solicitation or charitable sales promotion when the other person has not given consent in writing to the use of his or her name for these purposes, and
using or exploiting the fact of registration so as to lead any person to believe that such registration in any manner constitutes an endorsement or approval by the state.
Thirteen states require nonprofits to provide a written notice, called a disclosure statement, to prospective donors. The 13 states are Colorado, Florida, Georgia, Illinois, Maryland, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, Virginia, Washington, and West Virginia. Among other things, the disclosure statement must inform anyone being solicited that information about the nonprofit can be obtained from either the state or the nonprofit itself. Most of these states require that the notice be included on every printed solicitation and every written confirmation, receipt, or reminder of a contribution. However, two states (North Carolina and Washington) require that their notices always be provided at the point of solicitation.
Each state’s disclosure statement is worded differently. As a result, nonprofits that solicit from a large number of states or nationally may have to include up to 12 different disclosure statements in their solicitation materials.
The required disclosure statements for each of the 13 states are included in Appendix A under the state information. Here are examples of two of the required disclosures:
Georgia. All nonprofits in Georgia must include the following disclosure statement on every printed solicitation and every written confirmation, receipt, or reminder of a contribution:
A full and fair description of [name of charity] and its financial statements are available on request at the address indicated above.
Florida. All nonprofits in Florida must include the following disclosure statement on every printed solicitation and every written confirmation, receipt, or reminder of a contribution:
A COPY OF THE OFFICIAL REGISTRATION AND FINANCIAL INFORMATION MAY BE OBTAINED FROM THE DIVISION OF CONSUMER SERVICES BY CALLING TOLL-FREE, 1- 800-435-7352
Rules for Professional Fundraisers, Solicitors, and Consultants
In addition to regulating nonprofits, state solicitation laws also have rules governing professional fundraisers, solicitors, and consultants who help nonprofits raise money. These rules differ from those that govern the charitable organizations soliciting on their own behalf, but they are intended for the same purpose—namely, to prevent any fraud or abuse when soliciting money from donors. In the case of professional fundraisers, the laws are also intended to protect nonprofits from professional fundraisers misusing donor funds they receive on behalf of the nonprofit or misrepresenting the organization in the solicitation of funds.
If your nonprofit hires outside professionals and companies to help with fundraising, you need to know about your state’s rules governing professional fundraisers. This includes, for example, hiring a telemarketing firm to call prospective donors, paying a fundraising firm to conduct a door-to-door campaign, or using a direct marketing firm to help plan a direct mail campaign.
This book does not cover the registration or other legal requirements for professional solicitors and consultants. For more information on your state’s requirements, contact your state’s charity regulator. A list of state charity offices can be found at the National Association of State Charity Officials website at www.nasconet.org/agencies.
First, there is a good deal of confusion about the terms used to describe outside fundraisers because they differ from state to state.
Professional fundraisers. As used in this book, a professional fundraiser is any outside professional person or company hired by a nonprofit to help with fundraising. These are independent contractors who hire themselves out to nonprofits—they are not employees of their nonprofit clients. There are two basic types of professional fundraisers regulated by the states:
professional solicitors, and
Professional solicitors. Depending on the state, professional solicitors may also be called paid solicitors, professional fundraisers, professional commercial fundraisers, professional fundraising firms, paid fundraisers, or commercial fundraisers. Whatever they are called, these people or companies are paid by nonprofits to solicit contributions directly from the public. This may be through telemarketing, door-to-door soliciting, event marketing, or any other type of direct solicitations.
Fundraising consultants. Fundraising consultants are also called fundraising counsel (though they are not attorneys) or professional fundraisers. Unlike professional solicitors, fundraising consultants have no direct contact with the public. Instead, they help a nonprofit plan or manage a fundraising campaign. Direct marketing firms often fall into this category. An outside grant writer hired as an independent contractor to help write a grant request would also be a fundraising consultant.
State Registration and Other Requirements
Because they deal directly with the public and may obtain access to cash or personal credit card information, professional solicitors are regulated very closely by the states to guard against misrepresentations and fraud. Forty-five states require professional solicitors to register or be licensed by a state agency. The only states that do not require registration are Montana, Nebraska, Nevada, Texas, and Wyoming.
Solicitors may also be required to file annual financial reports with the state regarding charitable solicitation activities conducted during the preceding year. Most states have other rules governing solicitors’ activities, such as requiring them to disclose their identity as such before soliciting donations or having to disclose their fundraising expenses and ratios upon request.
Most states also require professional solicitors to enter into written contracts with the nonprofits they work for and post a bond before commencing work in a state (generally $10,000 or $20,000). They are also subject to extensive record-keeping requirements.
Because fundraising consultants typically do not have direct contact with donors, they are not as strictly regulated as professional solicitors. However, 28 states require fundraising consultants to register.
If You Hire Outside Fundraising Help
If your nonprofit hires an outside professional solicitor or fundraising consultant, you should always make sure it has complied with all of the legal requirements of the state or states where the funds will be raised. First, make sure the person or company is registered, if required. Although it is the solicitor’s or consultant’s obligation to register, in some states a nonprofit that hires an unregistered solicitor or consultant can be subject to fines or penalties.
Also, you should always have a written contract with a professional fundraiser. Many states will require you to include copies of all such contracts when you register or renew your registration. Failure to do so could result in your registration being rejected.
The Federal Trade Commission has prepared a useful guide for nonprofits that hire fundraising professionals called “Raising Funds? What You Should Know About Hiring a Professional.” It is available on its website at http://business.ftc.gov/documents/bus32-raising-funds-what-know-about-hiring-professional.
All required filings under state solicitation acts are public records. This includes not only the application for registration, but annual reports and contracts as well. In most states, the public can view or obtain copies of all of these records through a state website. These documents and the IRS Form 990 are heavily relied on by potential donors and others seeking information about a nonprofit. Make sure you carefully and accurately complete these forms and filings and do everything you can to make sure your organization’s good works and responsible spending are reflected in these public records.