Guest blog by Tony Martignetti, Esq.
Until this year, Rosa wouldn’t have devoted space to the laws that vary widely across all states—and Washington, D.C.—that require nonprofits to register in each state where they solicit donations. The laws have been around for decades and ignored due to lack of enforcement. Nobody cared.
This year, the IRS stepped in with its vastly revised Form 990. It contains two questions that pointedly ask about your compliance with state Charity Registration laws. An officer signs your 990 under penalty of perjury. Add to that a couple of recent enforcement actions and you’ve got a timely guest blog explaining what this is all about and why you need to pay attention.
You’re required to register in states where you solicit.
In states like Arizona, Florida, Georgia, Illinois, New Jersey, and New York, the mere existence of a “Donate Now” button triggers your registration requirement. One of Rosa’s posts tells you how to optimize your donation page. If you’ve got one, recognize that it has implications for registration.
If you’re inviting people to your website with email, U.S. mail, telemarketing, ads, events or meetings, you’ll need to register in the states above, plus the likes of California, Texas, Utah and others, if your inducements find residents of these states.
Every state considers paper mail, telemarketing and advertising that seek donations to be a solicitation. So in the states where you’re using these methods, it doesn’t matter whether you’re using online giving.
Here’s an enormous timesaving tip for a small nonprofit that takes donations on its website. If you get all of them from just a few states (or only one), put a disclaimer on your donation page. Say that you only accept donations from those states. Go one step further and remove the other states from your pull down menu, or only accept the right state names in an input field. Now you’re only soliciting in the couple of states that mean the most to you. The laws of every other state are irrelevant.
You know, if you’re not following the laws where you solicit, your board members could be liable. They’re fiduciaries to your organization. Under principles of fiduciary duty, they can be personally liable for the misdeeds of your charity.
In a good number of states, including Arizona, Florida and Pennsylvania, failure to register is a crime, either a felony or misdemeanor. In a lot of other states there are civil, not criminal, penalties. In October, the Secretary of State in Georgia fined a nonprofit $25,000 for noncompliance with the state’s registration statutes.
There are some bright spots in all this. A lot of states have exemptions. They vary wildly based on mission, gross revenue, fundraising revenue and in-state revenue. You might qualify.
Also, compliance isn’t complicated. It’s just time consuming. It’s the perfect project for a detail-conscious volunteer or intern.
Here’s a plan for getting started. First, register in your home state. Then, look at where you solicit the most. If you’re accepting gifts online, your solicitations are based on state populations. Start with the most populous state, California, and work down, registering where online giving is a solicitation. Remember, by limiting the states that can donate online, you’ll save considerable time.
If you’re fundraising by paper mail, email, phone, advertisements and meetings, query your database for your constituents’ states of residence, ranking the output file by descending frequency of constituents. At the top of the list will be the state in which you do the most solicitations. Start there and work down. Remember, you might be exempt in some states.
Eventually, with time devoted to one or two states per month, you’ll get your nonprofit into compliance. That protects your board, your officers and your organization’s reputation.
About the Author
Tony Martignetti, Esq. has been supporting the fundraising needs of non-profits since 1997. He is the author of Charity Registration: State-by-State Guidelines for Compliance and managing director of Martignetti Planned Giving Advisors, LLC. His two websites are www.StateCharityRegistration.com and www.mpgadv.com.