Are you registered to fundraise?
This week’s blog is a reminder to check state requirements to see if your organization is required to register before launching any charitable solicitations. Or, if you are assisting a nonprofit with fundraising for pay, to see if you are required to register as fundraising counsel or professional fundraiser.
The website of the National Association of State Charity Officials has a list of all of the state contacts and links to the state agency websites (though check them as not all are still current). In some cases, they also have links to the state statutes so you can read the rules yourself.
Registration Requirements for Charities Soliciting Funds
In general, if your organization is soliciting for funds in a state, you are likely to be required to register for charitable solicitation in that state. Each state sets its own rules and there may be various exemptions depending on the budget size and type of the organization. (See below for a discussion of internet fundraising)
The registration process generally includes completing a form that tends to ask for much of the same information that could be gained from the Form 990 that nonprofits are required to file with the IRS. Many states ask for additional information about your fundraising programs, including whether or not you have used fundraising counsel or professional solicitors in the last year. There is usually a fee for filing and for completing your yearly renewal. And each state has guidelines for whether you meet the income threshold to require an annual audit.
Take a look at the article by Joanne Fritz that appeared on About.com — she has some very specific recommendations for you.
Registration Requirements for Professional Fundraisers
Most states also require those of us in the business of assisting nonprofits with their fundraising – aka professional fundraisers — to also register in the state. Usually a distinction is made between fundraising counsel and fundraising solicitors.
Fundraisers solicitors are engaged in either actively soliciting for funds and/or may have access to donations directly whereas fundraising counsel (like Cause & Effect Inc.) may plan, manage, advise or assist charities in their fundraising but don’t have access to donations or solicit directly. Usually employees, directors and volunteers of a charity are excluded from this registration requirement.
The fees for registration are steep. For example, New York charges fundraising counsel $800, Rhode Island $240 – that’s annually! And depending on the state and what type of fundraiser you are, you may also be required to take out a bond.
Professional fundraisers are required to send a copy of all contracts to the appropriate state agency, usually within 10 days of signing. Many states require a “closing statement” upon completion of the contract (and some an interim if the work isn’t completed in a year) with extensive disclosures on types of fundraising and funds raised.
If you are involved in providing any services to a charitable nonprofit that involves raising money – even if you don’t consider yourself a professional fundraiser – you would be wise to check to see if you fall under state statute.
The net is pretty broad and some states are extremely aggressive in tracking down professional fundraisers. Don’t get me started on how crazy I think these registration requirements are for fundraising counsel in particular … what other professionals offering comparable management services to nonprofits require these costs and this degree of scrutiny?
Of course there are bad apple solicitors out there who intimidate prospects or raise money for phony causes. But state statutes across the country already forbid fraudulent solicitation and have penalties for such. I could say more, but this post isn’t meant to be rant. (But let me say, as professional fundraisers and through our associations, we could be much more active at the state level educating lawmakers about our profession and engaging in advocacy on these issues).
So, what about raising money on the web? What are the registration requirements?
Here’s where things get really cloudy.
There should be very few nonprofits left that don’t have a web donation presence. And with sites like Guidestar that have partnerships with enterprises like Network for Good that support online giving, in reality, every nonprofit could be considered soliciting in any state.
Just the paperwork alone, never mind the cost, of registering in all states is significant and overwhelming for the vast majority of nonprofits. So the state Attorneys General came together many years ago to try to create some guidelines – known as The Charleston Principles — to help state lawmakers consider how to treat internet solicitation.
The guidelines, which are voluntary recommendations, suggest that “organizations located outside of a particular state must register if they use their website to specifically target people in that state, or receive contributions from the state on a repeated and ongoing basis or a substantial basis through its website.” Email solicitations count.
I wish I could give more practical advice, but the application and interpretation of these principles is pretty uneven. You may find this Nonprofit Times article from September 2010 helpful.
If you are a nonprofit, be very familiar with the statutes in each state you solicit, get advice from your legal counsel, and make sure that your board of directors understands the legal requirements and sets expectations for your registration.
P.S. Did I mention that a number of states also require disclosure statements on any solicitation mailed to residents of the state? Check on the back of the reply coupon in a number of the direct mail solicitations you received to see what I’m talking about. The Association of Fundraising Professionals has a summary of the states and their required language on their website (though don’t rely solely on this).
P.P.S. I would appreciate hearing your stories about what decisions you made to register in multiple states, why, and whether you’ve ever encountered difficulty with any state agency.
Disclaimer: This column is meant to be informational only and for the purpose of giving legal advice. You should check with your attorney to get advice on any particular aspect of your fundraising registration requirements.
Thanks Gayle for this great information. Several organizations I’ve met with over the last year have been surprised that they are required to register in the state to raise funds. Did you know that the cost to register as fundraising council is $1,000? Luckily that’s just the first year – annual renewal is much less.
And thanks to for the information about the Charleston Principles. Requirements for internet fundraising had the potential to get really messy.
$1000 K! I’ll quit complaining about Massachusetts and Rhode Island’s fees. Is that the fee in Florida?
Unfortunately, despite the Charleston Principles, I think the registration issues around Internet fundraising are still the wild wild west with no clarity on how any state will interpret their already on the books statutes.
Gayle, thank you for doing a post about a subject that is often not thought about. I would just like to point out a number of things. First, nonprofits, professional solicitors, and professional consultants are required to register (unless exempt) where they solicit; registering in one’s home state is not sufficient if you’re soliciting out of state.
Second, while the Charleston Priniciples can mean that a nonprofit that has a website but does not otherwise solicit in a given state is not required to register in that state, the fact is that if the nonprofit receives a donation from that state, it will likely want to solicit a renewal gift which could trigger a registration requirement.
Third, some organizations are exempt from registration. However, if an exempt organization hires a professional solicitor, this could trigger a registration requirement. Ahh, it can be so confusing. This leads me to my next point.
Fourth, nonprofit organizations, professional solicitors, and professional consultants should hire an EXPERT lawyer. While there are plenty of lawyers out there, there are very few true experts in this area of the law. Just like you wouldn’t go to a neurologist for heart trouble, you should make sure you pick a lawyer with the right skills for your situation.
(Nothing in this comment is intended as legal advice.)
Thank you for filling in more of the pieces that I shortened for the sake of getting the post printed 🙂
I agree completely about “expert” lawyers and recommend the same to clients in their search for accountants. You do need to pick professionals with expertise in the nonprofit sector.
There are days I ask “how did fundraising regulations get so complicated and why would anyone want to stay in this as a consulting profession?” in their attempt to keep informed and keep in compliance. Imagine the hundreds of thousands of small nonprofits run entirely by volunteers or few staff who don’t even know what they don’t know. Makes me really angry at the bad apples whose actions have led to these regulations to begin with.
But, I also fault our profession and professional associations for not being more aggressive at the state level to help prevent or even roll back the complications. It is a bit like pushing a boulder uphill, but there are very few people showing up in the statehouse to represent the sector’s interests. And when they do, they tend to carve out the exemptions for particular parts of the sector, e.g. hospitals and universities. Like all politics, the smallest among us are the least representative.
Gayle, good distinction to make between fundraising solicitors who are making and actual “ask” and fundraising council or coaches who do not directly solicit anyone for a gift but may be assisting with messaging.
Great info, Gayle. My clients often deal with a number of registrations and licenses needed especially centered around fundraising events. But just as Michael described, that often leads to follow up asks which triggers an entirely new set of guidelines. While, cumbersome, it is still critical that a non-profit invest the time and energy to follow the regulations. Can you imagine future fundraising if a non-profit was sanctioned for not following the rules?