What Is It?
Most states and the District of Columbia require 501(c)(3) organizations to register with their Department of Charitable Solicitations. This department is usually a division of either the Attorney General’s office or the Secretary of State.
Must my organization register?
Yes, it’s the law. Typically, states exercise regulatory authority over nonprofits based on one (or both) of two premises: the nonprofit is physically “present” in the state (e.g., has an office, owns real estate, or conducts program activities) or the nonprofit raises funds in the state.
In either case, a state may require the nonprofit to “register”, that is, to provide identifying information about the nonprofit and its operations. Organizations of any size and any means may find that raising funds from the public — even when conducted modestly from a single location — will give rise to regulatory obligations to multiple states.
In fact, today most states regulate fundraising. They do so through statutes — usually called “solicitation laws” — that are primarily concerned with the solicitation of charitable contributions from the general public. The centerpiece of most of the regulatory schemes is comprehensive reporting, by nonprofits and by the outside fundraising firms and consultants they employ.
What is registration?
Compliance reporting under solicitation laws is divided into two pieces: (1) registration, which provides an initial base of data and information about an organization’s finances and governance; and (2) annual financial reporting, which keeps the states apprised about the organization’s operations with an emphasis on fundraising results and practices. Typically, states require both registration (at least an initial registration) and annual financial reporting.
With thirty-nine jurisdictions regulating in this manner, there is inevitably little consistency of approach. Some states have one-time registration; others require annual renewal of registration; some will require submission of every common governance and financial document; others make do with just an IRS Form 990; and so forth. But each has its own registration form (or forms) and, until the advent of the Unified Registration Statement (URS), required its submission, verbatim.
Generally, any nonprofit conducting a charitable solicitation within the borders of a state, by any means, is subject to that state’s law and is therefore required to register (and must do so before soliciting). Also, generally, the operative terms “charitable” and “solicitation” are defined very broadly and could include, for example, a website posting by an environmental organization inviting contributions from the public.
In other words, the soliciting organization need not be a “charity” in a strict sense nor have any physical presence of any kind in the state. So, a letter, phone call, or newspaper ad requesting financial support from a state’s residents is enough, in the unchallenged legal opinion of the states, to trigger the coverage of (i.e., give jurisdiction to) that state’s solicitation law.
Noncompliance Penalties
Significantly, technical compliance with any state’s registration law requires initial registration before the first solicitation has been directed into the state. The fact remains that many nonprofits have not done the necessary legal homework before launching fundraising campaigns. If your nonprofit is one of these, you should be very concerned. But you should not be deterred from going ahead with registration because you fear you are breaking a law already and it’s too late to comply.
Penalties for Noncompliance Could Cost You Thousands!
Failure to register before soliciting is a violation of law and could subject the organization (and in some circumstances, its officers or directors) to whatever sanctions (e.g., a substantial fine) exist in each state’s law. But, the states generally wish to encourage honest efforts to comply with registration laws and tend to employ sanctions only when enforcement officials deem it necessary. So, an organization able to demonstrate its good faith which promptly registers after discovering its obligation (albeit tardily) stands a good chance of avoiding or minimizing sanctions. The bottom line: registration is the law and you must comply as soon as possible.
We Can Help!
The Foundation Group provides Charitable Solicitations Registration services for every state in the nation that requires it. There is simply no reason to continue to operate out of compliance and to risk the penalties associated with not registering.
