With the advent of social media, email, and “Donate Now” buttons, it is increasingly common that nonprofits solicit donations online. Part of these tools’ attractiveness is that nonprofits can reach broader audiences, and that they make giving to a cause relatively simple, at least on the surface.
The real complexity arises in charitable solicitation registration and compliance. Forty-four states currently have laws surrounding charitable solicitation (aka fundraising), and forty-one of them have registration requirements. Whether your charity has to register in a state depends on a number of factors, including the amount of contributions you receive, the purpose for which your nonprofit is organized, and the methods you use to solicit. You can review your state’s registration requirements here.
Why is Online Fundraising So Complex?
Nonprofits are thankful for straightforward rules surrounding traditional solicitation methods, like phone calls, grants, and individual mailings. If you send a letter asking for a donation to someone in Oregon, you are soliciting funds in Oregon, and you must comply with applicable registration requirements in that state.
Online fundraising is trickier. As state laws catch up to the pace of technology, there is still confusion as to what constitutes a solicitation. In 2001, the National Association of State Charity Officials (NASCO) released a set of recommendations called the Charleston Principles, which are guidelines for how state charitable solicitation authorities should handle Internet fundraising, but they are not law.
The Charleston Principles suggest that registration should be required if a nonprofit 1) has an interactive webpage that allows donors to give, such as a “Donate Now” button, 2) sends targeted emails to someone they know is in a given state, or encourages people in a state to give, or 3) receives contributions from a state on an ongoing, repeated, or substantial basis.
Some states, like Pennsylvania, follow the Charleston Principles in deciding what constitutes an Internet solicitation. Other states, like Florida, do not. The reality is, by maintaining an interactive webpage with a “Donate Now” button, your nonprofit is technically soliciting funds in every state, and you must comply with registration or exemption requirements nationwide.
How to Stay Compliant
The two main ways to ensure full compliance are either to file a registration or exemption in all 41 states that have such a requirement, or to accept donations only from the states you have registered in. Typically, this message takes the shape of a disclaimer on your “Donate” webpage.
Because charitable solicitation registration and renewal has an initial and annual cost, some organizations choose to prioritize registration, beginning with the state of incorporation. Also at the top of the list are states that are more proactive in enforcement of charitable solicitation laws, such as New York and New Jersey. Charities might also register in bigger states that are more likely to be sources of contributions, such as Illinois or California.
Many large organizations that solicit online find it more efficient to register nationwide. For them, the investment in nationwide compliance is worth the added contributions, avoidance of penalties, and increased credibility with prospective donors nationwide.
Government oversight of charitable solicitation, particularly online, is ever changing. Keeping up with diverse state requirements and managing annual filings can be a huge administrative task for nonprofits of all sizes, with real penalties at hand for noncompliance. Remember, there are service companies, attorneys, and other professionals that can help your organization stay on the right side of the law. By staying in compliance, you will help inspire confidence in your donors, wherever they are.
Harbor Compliance does not provide tax, financial, or legal advice. Your organization’s fundraising activities, and consequently, your charitable solicitation requirements may vary.
The preceding post is by James Gilmer. James Gilmer is a compliance specialist for Harbor Compliance, which establishes 501(c) nonprofits and helps them stay compliant. James is co-founder of Berks Sinfonietta, Inc., a chamber orchestra in Berks County, Pennsylvania.