Charitable Solicitations Registration: Don’t Let Complexity Discourage Compliance

The system for registering to solicit contributions isn’t the easiest to understand.  Even if it’s only one state you are endeavoring to comply with, the expectations aren’t that easy to follow.  When it’s a multi-state registration your nonprofit is facing, the complications can seem next-level.

We know it’s hard.  But never let complexity discourage compliance.

Foundation Group has been helping nonprofits stay compliant with fundraising and charitable solicitation registration requirements for over 15 years.  While many regulatory filings have been simplified, streamlined, and digitized over the years, it’s arguable that state charity registration has become even more difficult to keep straight.  Our purpose with this article is to provide some context, some advice, and maybe, some hope.

If you’re reading this article, it’s a pretty safe bet that you know what charitable solicitation registration is.  But just in case you’re unfamiliar with the topic, this regulatory framework is a state-level registration requirement whereby a charitable organization gets a license, if you will, from the state in order to raise money from the public.  40 states, plus Washington, DC, require nonprofits to register.

Another handful of key points are:  1)  Nearly all forms of revenue generation count as “solicited” revenue, including money earned through the sales of goods and services;  2)  Raising money in multiple states most likely means you will have a multi-state registration requirement, and 3)  Registration is not “one-and-done”.  Most states require annual renewal of your registration.

One of the most difficult realities is that none of the states share the same rules, thresholds, and deadlines.  Some states allow registration after incorporation and before 501(c)(3) status is granted by the IRS.  Most states, however, require 501(c)(3) status to be in place.

Some states are lenient on late filers.  Other states impose painful fines and penalties.  Some states that impose penalties are open to abating them upon diligent compliance catch-up.  Others, like South Carolina, can’t remove a penalty once imposed due to state law!

Some states require an annual audit by a CPA firm at a certain threshold of gross revenue.  Others don’t.  And among the ones that do, the revenue threshold varies greatly.  Tennessee’s is $500,000 in annual gross revenue.  Same for Michigan.  In Georgia, the threshold is $1,000,000 at the time this article is being written.  Oklahoma and Colorado have no audit requirement.

Then there are due dates.  Those vary wildly, as well.  Some states tie theirs to Form 990 deadlines.  Others seem to have due dates that are entirely random and unattached to other filings.

But denial is not a strategy…rather, it’s a recipe for disaster.  So what’s the alternative?  Understand what your compliance exposure is and make every effort possible to get registered where your nonprofit needs to be.

And, remember what I said above.  Revenue generation in multiple states brings with it multiple states of compliance…not once, but virtually every year.

It’s enough to discourage any small organization.  So what do you do?

We have said this about most of the compliance and tax areas we serve:  they are not suited to do-it-yourself efforts.  Charitable solicitations registration certainly falls into this category.  Even if you hire a person or a firm to help you, make sure they are actually professionals in this area.  There’s nothing worse than the false comfort of relying on bad advice.

Here are four steps to ensure compliance and keeping your sanity:

Step 1.  Know your exposure.  This is hard to do on your own.  Unless you are a very small organization with a revenue-generation footprint solidly within your state’s borders, you likely have multi-state registration concerns.

But don’t assume that you automatically have a multi-state registration simply because you have a donor or two in another state other than your home base.  Maybe you do, and maybe you don’t.

One of the most important things we do with each fundraising registration engagement is to dig deep and look at your nonprofit’s activities and revenue generation to help you determine your real registration picture.  We believe it’s just as bad to over-register as it is to under-register.

Step 2.  Keep a calendar of compliance due dates.  If you are not working with a professional service provider on these registrations, it’s critical that you keep up with these on your own.  If you don’t schedule these registration and renewal deadlines, you WILL miss some.

Clients working with a firm like Foundation Group should have access to visibility of these things.  Our new client operations system helps clients track registrations and other compliance filings by due date and degree of completion.

Step 3.  Seek to understand what your nonprofit’s regulatory filings are.  In other words, don’t just rely on your service provider to tell you to sign and mail something, but you have no idea what it is.  You and your board of directors have a fiduciary obligation to look after the financial best interest of your organization.  You cannot do that effectively if you do not understand what it is you’re even filing.

Step 4.  Relax! Sit back and enjoy the satisfaction of knowing that you haven’t left any bases uncovered and that you are confidently operating in full compliance when it comes to your nonprofit’s fundraising and revenue generating activity.