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Charitable Solicitations – Time to Get Compliant!

Charitable Solicitations Registration. “Never heard of it,” you say.  Well, you are not alone.  As astounding as it may seem, estimates of noncompliance range from 85-95% of charities and nonprofits nationwide.  This level of noncompliance has persisted primarily because of 2 reasons:  1) lack of communication between state agencies and 2)  grace.  But, the times…they are a changin’.  It is time to get compliant!

What is it? It is helpful to start by explaining what we’re talking about.  42 states and the District of Columbia require nonprofit organizations that raise or intend to raise financial support from the public to register with that state’s Charitable Solicitations Department.  This department is typically run from within the state’s Attorney General’s office, though some originate within the office of the Secretary of State.

What is the purpose? Simply put, the purpose is to protect the donating public.  Charitable organizations exist to provide charitable benefit to a specific group of people and/or the community at large…or, at least they are supposed to.  The IRS maintains regulatory authority over the qualifications and compliance for federal tax exemption and nearly all states accept IRS 501(c) determination as sufficient for state tax exemption.  Starting back 15 years or so, the states began to discover that this situation did not give them sufficient visibility into the governing structure, finances and activities of nonprofits necessary to protect the citizens of the state.  This gave rise to most states creating a department to regulate charitable organizations by requiring them to first register, then renew/report annually.

How do you register? Registration is accomplished by filing a registration statement with the applicable state department.  In the past, that process was of nightmare proportions.  Each state had a completely different procedure…some of which was worse than filing for 501(c)(3) determination, if that’s possible.  This led to a patchwork of regulations that proved confusing and burdensome, especially to any organization that had any level of solicitations activity in multiple states.  Fortunately, things began to improve with the Multi-State Filing Project, a collaboration of the National Association of Attorneys General and the National Association of State Charities Officials.  This project resulted in the Unified Registration Statement (URS) that is now accepted for registration purposes in 37 states.  While the URS is a significant improvement over every state doing something different, this consolidation is still a work in progress.  Many of the states still require supplemental information to accompany the URS, some quite substantial.  In addition, filing thresholds and deadlines vary by state, though most require registration prior to the first solicitation of contributions.

What happens if you don’t register? Failure to register is against the law.  Period.  As mentioned above, the level of noncompliance is astounding.  Most organizations are innocently ignorant of the requirement to register.  And since the level of state enforcement has been low historically, some organizations that are aware of the requirements have chosen to ignore the law and not register.  Many organizations, however, are beginning to find that particular stance to be very costly.  State charitable solicitations departments nationwide are consolidating their databases with the states’ corporation divisions, resulting in an instant enforcement list.  Charities that wait to get nabbed suddenly find themselves facing substantial fines and, in some cases, injunctions preventing them from operating until they become compliant.  Fortunately, most states are quite forgiving to those who register voluntarily, albeit tardily…for now.  Don’t expect that to last very much longer.

Can The Foundation Group help? Absolutely!  We have a fully staffed compliance department that helps clients with everything from Form 990 preparation to charitable solicitations registration and renewal.  There is absolutely no reason for your organization to get blindsided by a surprise letter or visit from a Charitable Solicitations official.  Don’t wait to get busted…get registered!  It’s the law!

For more information, see our Charitable Solicitations Registration page.

Greg McRay, EA

Greg McRay, EA

Greg McRay is the founder and CEO of The Foundation Group. He is registered with the IRS as an Enrolled Agent and specializes in 501(c)(3) and other tax exemption issues.

This Post Has 7 Comments
  1. If a 501c3 scientific organization solicits ONLY from its members (defined as persons who pay annual membership fee, does the organization need to register to solicit these funds in all states where members live?

    1. This varies by state, unfortunately. You would have to know how each state defines “solicitation”. This information is usually available through the state department of Charitable Solicitations.

  2. In your answer, can you clarify when you say that Solicitations require registration in the state the solicitation is taking place – does that mean you only have to register in your home state and not in all states?

    On the Charitable Solicitations Registration Services page, it states “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.” That statement sounds like you do need multiple state registrations.

    Molly Sanchez
    St. Joseph’s Academy
    Baton Rouge, LA

    1. Glad to clarify, Molly. You are correct in your interpretation of our CS registration services page. You have to register in each state in which you will be soliciting donations. Hope that helps!

  3. We get donations from all over the USA. Do we have to register charitable solicitations in every state–or just our own?

    1. It depends upon how you solicit those contributions. Professionals like us are in agreement that web-based solicitations are very unclear as to whether or not they require registration. Most, including us, feel they do not at this point. Solicitations by phone, mail or in person, however, generally do require registration in the state the solicitation is taking place.

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