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Sunday, November 20, 2011

Fundraising Online - 40 states require registration if requesting donations from their residents

Fundraising Registration -- Does Your Nonprofit Need to Register?

Most states require nonprofits to register before soliciting contributions from state residents. Here's what you need to know.

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 exceptDelaware, 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

ArizonaKansasNew HampshireRhode Island
ArkansasKentuckyNew JerseySouth Carolina
CaliforniaLouisianaNew MexicoTennessee
ColoradoMaineNew YorkUtah
ConnecticutMarylandNorth CarolinaVirginia
Dist. of ColumbiaMassachusettsNorth DakotaWashington
FloridaMichiganOhioWest Virginia

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).
by: , J.D.

We have a "donate here" button on our nonprofit's website. Do we need to register for charitable solicitation purposes in all 50 states?

Technically, having a "donate here" button on your website constitutes a "charitable solicitation" that is accessible by anyone with an internet connection. Consequently, some states that regulate solicitation activity will take the position that your nonprofit has to register since your website is solicitation activity that impacts the residents of their state. (Florida, Pennsylvania, New Jersey and New York are examples). Other states are not as aggressive but it's still a risk not to register. The National Association of State Attorney Generals have developed a common set of guidelines, called the "Charleston Principles" that address this issue.

The Charleston Principles provide that a nonprofit that uses the internet to solicit contributions MUST register in the state where it has its principle place of business. The Charleston Principles also provide that a nonprofit with an interactive web site that asks for donations must register in other states if it specifically targets residents of those states (such as through letters or phone calls) or receives contributions from residents of those states on a regular basis, or receives significant (e.g., high dollar value) contributions from residents in those states. See page 3 of the Charleston Principles.

Currently 39 states require registration prior to solicitation. The registration regulations vary state to state. Your first step is to determine where your nonprofit is most actively soliciting and where your supporters reside, and then make sure to register, if registration is required in those states. Secondly look at where your more significant contributions are coming from and make sure to register there as well. There is a common form you can use, called the Unified Registration Statement (URS) to make multistate filing easier. To see a summary of which states require registration and will accept the URS, visit the web site of the "Multistate Filing Project" here. This site is also useful in helping you see at a glance what the various state registration requirements are and which states do not require registration.

Do we have to register for fundraising purposes in more than one state? Example: Our organization primarily solicits donations in the state where we are incorporated, but several of our long-term donors have now retired and moved out of state. We are planning a conference next year in yet another state where we will solicit corporate sponsorships.

This question raises two issues: whether your organization should register for fund-raising purposes, and whether your organization should also register to do business in another state. There are 39 states and several municipalities that require registration for fundraising residents in those states even if the solicitation is for small contributions or via the internet rather than direct mail. It is always safest to know the specific laws where your organization is engaged in any solicitation and determine whether registration is required. Failure to register can result in significant penalties and in extreme instances, prevent your nonprofit from solicitation activities in that state. It’s always safest to check with the Secretary of State, Attorney General or whichever government unit has oversight for charitable organization’s solicitation activities.

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