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Don’t Under (or Over) Register for Charitable Solicitations

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When it comes to staying compliant with state regulations governing fundraising, it’s pretty safe to say you want to do things the right way. And, if you are fundraising in multiple states, you will want to comply with the registration rules in each state. Don’t under-register!

But is it also possible to over-register? Yes, it is, and it can be just as big of a problem.

What Do We Mean by Under-Registering?

As we stated above, under-registration is a fairly easy concept to grasp. If you’re fortunate to be located in or soliciting in one of the 8 states with no registration requirement, congratulations. For most of you, however, you have your home state to deal with, as well as any other state in which your nonprofit is soliciting that has a registration requirement.

We have an entire article that describes which funding activities are considered a solicitation that gives rise to a registration requirement, so we won’t rehash that here. Suffice it to say, if your nonprofit has a revenue stream, it probably has a registration due.

The important issue here is to not overlook the requirements of states other than where your nonprofit is incorporated or based. It can be very tempting to think out-of-sight, out-of-mind, or simply that since you’re based in California, the state of Georgia isn’t going to be paying attention to the donors you are contacting in Atlanta. It’s entirely possible your nonprofit will fly under the radar. It’s also just as likely that you will be reported and suffer the consequences.

See our previous article on the Top 5 Risks of Fundraising Registration Non-Compliance.

The vast majority of the nonprofits that we work with have a registration requirement in their home state. More than half have at least one other state that they have to comply with, as well. We have dozens of clients with significant nationwide fundraising activity that have to register in all 40 registration states, plus Washington, DC. It is essential to the long term health of your organization to get registered and stay compliant wherever it is required.

What Do We Mean by Over-Registering?

At this point, you’re probably thinking, “I understand the idea of under-registering already! Get compliant and stay compliant… got it!”

But what is over-registering? Simply put, it’s registering for fundraising in a state unnecessarily. While admittedly, this is a less-common occurrence that we see compared to under-registering, it still happens. And when it does, it usually takes one of two forms.

Over-estimating your compliance burden. Even this can further be broken down into two versions: 1) not understanding the rules, and 2) playing it (too) safe. We often see version 1 happen when a nonprofit feels it needs to register in a state simply because they have a donor who lives there and gives regularly. This can get tricky because for some states, that’s true… I’m looking at you, California! For most states, however, the existence of a donor to your out-of-state nonprofit doesn’t necessarily trigger a registration requirement, so long as you are not actively soliciting them by asking them to give again, and you are registered in your state of incorporation.

As for playing it safe and registering all over the country, that just becomes an unnecessary administrative burden and cost to your nonprofit.

Bad advice and/or unscrupulous service providers. Sadly, we’ve seen lots of both. We have worked with lots of organizations that engage us for charitable solicitations registration services, after having previously worked with another supposedly professional firm or individual service provider. Some misinformed vendors adopt a play-it-too-safe approach similar to the above DIY description. The worst cases we’ve seen, however, have been nonprofits who were hard-sold and manipulated through fear tactics to register in many states where it was totally unnecessary, but it certainly lined the pockets of the company’s owners. This is highly unethical and, unfortunately, is something we’ve repeatedly seen from one particular national service provider.

Conclusion

Understanding your real compliance requirements is essential to the success of your organization. When it comes to fundraising registration, under and over-compliance is equally undesirable. Register everywhere you need to, and nowhere else.

We also understand that this stuff is complex and confusing. For each of the 41 registration jurisdictions, the rules are different. If you believe you have a multi-state compliance burden, figuring it out on your own can be hard.

One of Foundation Group’s core values is:

Sell every client no more and no less than exactly what they need!

It’s a mantra that our sales team lives by and their performance is graded on it. You can trust our team of professionals to help you sort it all out.

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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.

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