If you are a nonprofit animal sanctuary (or other animal-centered organization) soliciting donations in the United States, the chances are excellent that you are subject to charitable solicitation registration (“CSR”) or fundraising registration requirements. Nearly every state has fundraising registration requirements that require nonprofits to register with the state government before conducting any fundraising from its residents. This registration process is an entirely separate process from nonprofit incorporation or corporate registration but is often handled by the same office. It is also a different process than applying for tax exemption under section 501(c)(3) of the Internal Revenue Code, and it applies to nonprofit organizations even if they do not have 501(c)(3) status.
The good news is that registration itself is a pretty simple process and generally requires the same documents you are already preparing or maintaining for state corporate registration or a federal tax exemption [501(c)(3)] application. The not so good news – which is an underlying theme in the text that follows – is that the registration requirements and the process for fulfilling them vary by state and that these requirements are continually changing. There is also a lot of uncertainty about how the laws in many states apply to online fundraising, since many of these CSRs were written before online fundraising was a widespread practice. There have been several efforts over the years to streamline this process for nonprofits since keeping up with registration requirements in multiple states can be time-consuming and expensive for organizations that already have limited resources when it comes to both time and money.
If this is the first time that you’ve heard about CSR requirements, you are not alone. Many many nonprofit organizations are not aware of these regulations or are making an incorrect assumption that they are automatically exempt from these requirements or that these requirements are not actively enforced in most states. Until recently, CSR requirements have been challenging for states to police, and in some states, there has been little interest in actively pursuing enforcement. In recent years, however, there has been a growing emphasis on transparency regarding fundraising and fund spending by nonprofit organizations and a new focus on state fundraising registration requirements. Among other things, in 2008, the IRS added questions to IRS Form 990 (federal tax return form for charities with more than $25,000 in income) requiring nonprofit organizations to answer questions about their fundraising activities and related state registrations.
Compliance is important. It can be challenging to prioritize things like fundraising regulations when many other pressing priorities need attention, especially given all of the critical daily tasks involved in running an animal sanctuary or rescue. But taking a proactive approach to compliance should be a priority because compliance and transparency about compliance create trust, and trust is essential to securing donations, recruiting volunteers, attracting new talent, and fostering partnerships within your community – among many other things. Besides providing nonprofits with a vehicle to share more information with the public, these regulations also protect donors and legitimate nonprofit organizations from individuals and non-compliant organizations soliciting charitable donations fraudulently.
What Is A Charitable Solicitation Regulation?
Charitable solicitation regulations are state laws that regulate the solicitation of contributions for charitable (nonprofit) purposes. These laws generally require nonprofit organizations to register with a state agency before soliciting that state’s residents for contributions. At the time of this writing, more than 40 states have active charitable solicitation regulations.
The definition of “charitable organization” can vary by state, but generally, these rules apply to nonprofit corporations and unincorporated nonprofit associations – whether or not you have applied for or received federal tax exemption under IRS code section 501(c)(3).
What constitutes a “solicitation” is interpreted broadly in most states. If you’ve asked someone for something of value for your nonprofit organization – that’s a solicitation. Again, everything varies by state. But solicitations can be made in person or by phone, by event invitation, email, media advertising, text-based campaigns, and crowdsourced fundraising campaigns. In some states, a donate button on your website is considered a solicitation. In some states, applying for grants from in-state entities is regarded as a solicitation. In many states, “commercial co-ventures” trigger registration requirements – that is, if you are sharing revenue with a for-profit (cause marketing) or another nonprofit from a sales activity, that can trigger registration requirements in some states. Selling any items yourself where you represent that the proceeds will benefit your charitable organization triggers the registration requirement. In some states, solicitations for in-kind contributions can be applicable here as well.
It’s important to remember that these registration requirements are triggered BEFORE you solicit contributions and not after you have received a contribution. In fact, in most states, the requirement is triggered even if you never receive donations from those states where you have made an ask. It is also important to know that you are required to register in some states after you receive a donation from in-state, even if you never solicited in that state in the first place.
If there is any doubt in your mind about whether the activity you are engaged in is considered fundraising or solicitation, it’s worth doing your homework to find out for sure. In particular, you should be thinking about CSR any time you are doing things like launching a multistate communication that includes an “ask” (and note… a newsletter with a donate button on it counts in many states) or placing a donate button on your website or inserting a request for support into a social media post.
Aren’t A Lot Of Organizations “Exempt” From The Registration Requirements?
Some states do have exemptions from CSR registration for certain types of nonprofit organizations. In many states, religious, educational, political, governmental, fraternal, membership-based (where you are only soliciting donations from your members), and healthcare-related organizations are often exempt. Some states have exemptions based on certain thresholds, including annual income (the average minimum threshold is $25,000), the amount of contributions collected annually in that state, the number of in-state donors that contributed that year, and the methods you are using to solicit donations, among other things. You can determine if your organization is exempt from registration requirements in a specific state by visiting the relevant government agency for that state and reviewing the rules.
Three Important Things To Know About Exemptions
- Like everything else, the rules governing exemptions are different in each state. You might be exempt in New York but required to register in Illinois.
- Like everything else, the rules governing exemptions change often. Even if you were exempt last year, you need to research the requirements for this year to see if last year’s rules still apply in all of the states where you have registered.
- In most states, the exemption is not automatic. That is, you are still required to register your exemption for it to apply.
If Someone Else Is Doing Our Fundraising For Us, Do We Still Have To Register?
If you’ve hired a professional fundraising consultant to provide guidance on fundraising strategy or to solicit funds directly on your behalf, your organization still needs to register itself in most states. Your fundraiser, fundraising consultant, and in some states, even grant-writers are also required to register in the states where they are working on your behalf. Even though their registration requirement is not your direct responsibility, it is always smart to ask these consultants if they are registered and where they are registered before you begin an engagement with them. [See also: Online Giving Portals, below].
What States Require Fundraising Registration?
At the time of this writing, the below states require registration before soliciting in-state donations. Do not rely on this list – it changes. In addition, each state has its own rules about what qualifies as a solicitation, what types of organizations are exempt from registration, and what the specific registration requirements are for nonprofits soliciting in-state. And these rules also change regularly.
|Arizona (veterans organizations only)||Kansas||Nevada||Pennsylvania|
|Arkansas||Kentucky||New Hampshire||Rhode Island|
|California||Louisiana||New Jersey||South Carolina|
|Dist. of Columbia||Massachusetts||North Carolina||Virginia|
There are several helpful resources available online that can point you directly to the charitable division or other relevant agency in your state:
• National Association of State Charity Officials (list of state filing authorities)
• NOLO 50-State Digital Guide (updated quarterly)
• Harbor Compliance (a for-profit “managed compliance” provider with lots of helpful resources on their website, including the following helpful pointers):
- Most organizations register in their state of incorporation first.
- Many organizations commonly register in CA, IL, and TX because of the volume of donations usually received from those states.
- The states with the most strict solicitation registration requirements are Florida, New Jersey, New York, and Pennsylvania.
• Affinity Fundraising Registration (another for-profit organization that has resources and can handle compliance for a fee)
If I’m Fundraising Online, How Do I Know Where I Need To Register?
Since registration requirements are triggered by the act of soliciting (not the receipt of funds), merely displaying the option to donate on a website, social media page, or other electronic means that have multi-state reach can trigger requirements in many states where you may not currently consider your organization to be actively fundraising. Although there is a general (and frustrating) lack of clarity in this area, most compliance experts agree that fundraising online is generally considered charitable solicitation “nationwide” – which means you should be registering to fundraise in all states in the US that require fundraising registration.
Registration to fundraise in all states requiring registration is a daunting task for even the largest and most established nonprofits. Many smaller nonprofits start with a sort of risk/benefit analysis when determining their capacity for multi-state registration. This usually involves assessing the states where most of their donors reside and, in some cases, a determination not to accept donations from specific states. It can also mean an ongoing need to research state compliance requirements as fundraising campaigns are developed or as donations are received to determine if the new campaign or new donor is triggering a registration requirement. Many nonprofit organizations that solicit funds online go ahead and file in all of the states requiring registration because this can be easier and less time consuming than having to monitor, research and register multiple times in the course of a year because of new efforts or contributions.
How Do We Register?
Registering itself is probably one of the most manageable parts of this whole process. However, staying on top of renewal dates and other deadlines can be a time-consuming process if you’re not organized about it. It’s also important to find an easy way to monitor changes in state charitable solicitation laws for nonprofits so that you are apprised of any shifts in registration requirements, dates, and deadlines before they become a problem.
A Quick Overview Of The Actual Registration Steps
1. Determine where you need to register
- Start with the state where you are incorporated or where you have your principal place of business (for many sanctuaries, this is where they are physically located). Using one of the links above, visit the state government agency website that regulates charities and fundraising in your state to determine what organizations need to register (if you are exempt) and what you need to do to register.
- Assess whether you also need to register in other states and visit those state agency websites as well. In assessing whether you need to register in other states, some of the questions you should think about:
- What percentage of our incoming donations come from outside our state?
- Do we have any large or recurring donors that live outside our state?
- Is our annual income above $25,000?
- Do we provide a donate button on our website or in email or social media communications?
- Are we running any fundraising campaigns that we know have out of state reach?
- As you are researching the rules, keep an eye out for states requiring “foreign qualification” or an in-state “registered agent” to complete fundraising registration. Foreign qualification applies where a state requires nonprofits incorporated or primarily operating out-of-state to file for permission to conduct business in-state. In these states, soliciting residents to contribute may be considered “conducting business,” triggering the obligation to “foreign qualify” to raise money in-state. This is an extra step that you need to complete before you turn to the CSR process. The list changes often, but states that require foreign qualification are CA, DC, IL, ND. Florida and Georgia are also sometimes included in this list. Other states do not require foreign qualification but will require you to have a “registered agent” located in-state who can receive official documents on your behalf. Again, the list is always in flux but states that currently require a registered agent include UT, NM, MI, KY, VA, NH, SC, LA, and MS.
- Consider whether it makes sense to hire help. Many organizations rely on their accountant or their attorney to manage these filings for them. There are also “compliance service providers” – companies you can engage that will handle this process for you. In many cases, this involves uploading information and key documents to an online portal so that the service provider can assess where you need to register and then manage the registration process for you. In many cases, these companies will also handle foreign qualification and registered agent issues for you, either in conjunction with your fundraising filing or as a standalone service.
- Generally, registration involves filling out a form that provides details regarding your current operations and financials, paying a fee, and providing various supporting documents (which are usually very similar to documents you provided when you incorporated or applied for federal tax exemption and might include organizing documents, financial statements, your IRS determination letter/IRS 1023 application or most recent Form 990, information about any professional fundraisers working on your behalf, information about your fundraising activities). Usually, one or more officers of the corporation are required to sign your registration form.
- Registration fees vary and are often keyed to either your gross revenue or the number of contributions you received from the state you are registering in. Some states do not charge a fee. Some may charge fees in the hundreds of dollars for larger organizations. The average filing fee is about $35. According to the National Association of State Charity Officials, registering “nationwide” will probably cost between $1400 and $5000 depending on your size.
- Consider whether filing with a Unified Registration Statement makes sense for your organization. This is a form that was developed by the National Association of State Charity Officials that 30+ states will accept instead of their own registration form. The idea behind the URS was supposed to be time-saving for nonprofits – you fill out one form, and you can file it in many different states instead of filling out multiple state-specific forms and then filing them in many different states. In practice, many organizations are critical of the form because it requires more information than most state filing forms (to ensure it’s covering the information needed by as many states as possible), because it’s not accepted in every state, because even the states that accept it sometimes require different attachments (so you still have to customize your filing for each state), and because some state agencies seem to process their own forms faster than filings using the URS.
3. Confirm your registration
- Don’t submit your registration and assume all is good. Especially if it’s for a state that requires filing by snail mail, follow up to make sure your registration was received and processed. The length of time it takes for processing varies by state, from a couple of weeks to months. Check with the relevant state agency for guidance on whether you can begin fundraising in-state while your registration is pending.
4. Keep an eye on deadlines and changes to state laws
- Most states are going to require you to renew your registration (including any exemption registrations) annually. The renewal timeline varies by state – some of them require you to renew annually on the anniversary of your initial filing date, some handle renewals for all organizations on a fixed date each year, some use another timeline entirely. A couple of states only require you to renew every two years. After you complete your initial registration(s), add the renewal deadlines for each state to your calendar so that you don’t miss these deadlines down the road. Store your charitable solicitation license/certificate/registration (there are different names in different states) somewhere safe and set up a process for saving and storing the documents you’re going to need for renewal so that they’re easy to find when your deadline comes up. Do not miss your renewal deadlines – in most states there are financial penalties for late renewals.
5. Renew your registration on each state’s timeline
- Just like your corporate registration and the IRS Form 990, annual renewal is intended to keep the states up to date about your corporate “good standing” status and your current financials. For most states, renewal is also a form, a fee, and some supporting documents – but it’s often a different form than your initial filing.
- In most states, exemptions also need to be renewed annually.
- Some states require reviewed or audited financial statements during renewal (usually based on income thresholds). A list of states that require these types of statements can be found here. Background and detailed information on nonprofit financial audits are available from the National Council of Nonprofits’ online (free) Nonprofit Audit Guide.
- Don’t confuse these deadlines with corporate registration renewal deadlines – a separate state obligation for incorporated nonprofits.
6. Remember to Deregister
- If you are no longer soliciting funds in a specific state where you had previously registered, in most states, you need to actively deregister. Simply not filing for that year is not enough, and in fact, may subject you to penalties if you miss the renewal filing deadline. Deregistering should be something you look at each time a renewal deadline approaches. If deregistering is needed instead of renewal, it usually needs to be completed by the renewal date.
There Must Be An Easier Way To Do This!
There is not a lot of disagreement in the nonprofit world – this process is arduous and needs improvement. There are several associations and organizations that have been working for many years to try to reduce the burden that these regulations have created for nonprofit organizations, especially smaller ones. One effort underway currently is an effort to create a “single portal” that would allow nonprofits to upload their documentation to one website and select the states that will receive it. It may be several years yet before we see a solution of this type come to fruition. You can learn more about one of the more promising efforts currently underway here.
Donor-Advised Funds And Online Giving Portals
For now, many nonprofit organizations have turned to online giving portals to ease some of this burden. That is, instead of accepting online donations directly through your website, you can accept donations through a website operated by a donor-advised fund or online giving portal.
A donor-advised fund is a charitable giving platform explicitly created to manage charitable donations on behalf of donors. Online giving portals, also known as charity portals or gateways, are websites that accept and process donations on behalf of specific charities and then distribute the donations to those charities. Some of the best-known online giving portals are Network for Good and JustGive, which are operated by tax-exempt, nonprofit donor-advised funds. When a donor contributes to one of these online giving portals, legally, the donation is made to the portal sponsor and not directly to the end charity, but the donor “recommends” the end charity to which the portal distributes the donation. Except in cases where the portal organization decides that the end charity is not viable, the gift is distributed as recommended.
Most (but not all) donor-advised funds like Network for Good and JustGive have already completed charitable solicitation registration nationwide – in all states requiring registration for charitable solicitation. For the most part, this means that donations received through sites like these do not trigger your organization’s registration requirement, which can help you cut back dramatically on compliance requirements. Not all online giving portals manage state registration requirements for the end charitable organizations – be sure to ask the portal provider and review the terms and conditions for any platforms you consider utilizing to ensure that the portal sponsor manages charitable registration and other disclosure requirements. This is particularly important in the context of crowdfunding sites, which generally do not handle CSR requirements.
Many of the online giving platforms have the added benefit of sharing automated tools that help with donor receipts, confirmations, and thank you notes, as well as fundraising tips and other useful resources. There are also some limits to what online giving portals and donor-advised funds can do, however. For example, they don’t always work well for events. If you choose this route, be mindful that if you raise funds directly through other methods besides your portal, you will need to assess CSR requirements in applicable states separately.
Disclosure Statements: A Related State Requirement
In addition to registration requirements, in many states, nonprofit organizations must include disclosure statements in their solicitation materials. The language of the disclosure and the places the statement needs to appear are different in every state. Usually, the disclosure provides information about where a donor can obtain more info about the organization or explains to a donor that this nonprofit is registered for fundraising purposes. Typically the statement must be included on fundraising solicitations, including a website with a donate button or in the donation receipt or confirmation letter. Here’s an example of an animal sanctuary that has included these disclosure statements on its website.
What’s The Best Way To Stay On Top Of All Of This?
- Be diligent about your corporate calendar. Enter filing and renewal dates for corporate registration, fundraising registration, IRS, and other reporting requirements as soon as you become aware of them and reference your calendar often.
- Join your state association of nonprofits and sign up for their email list. Most of these associations flag changes in state regulations as part of your membership and membership dues are usually keyed off your annual budget. To find your state association, visit www.councilofnonprofits.org. You can also subscribe to the National Council of Nonprofits’ free e-newsletters at the same link.
- Hire a compliance service provider to manage all of this for you. Many companies provide this type of service. Search for nonprofit compliance services or nonprofit managed service provider for options. Several are also linked within this resource.
- Become a compliance expert. Compliance is time-consuming, and it requires attention to detail – but it’s not rocket science. Nolo has a super helpful resource for compliance newbies – a digital product covering all 50 states updated quarterly and organized by state: You can even “preview” this resource here.
What Happens If We Don’t Register?
It varies by state. More and more states are enforcing these regulations. They are reviewing 990s and state tax returns that include information about donations to specific nonprofit organizations. States are also beginning to consult and share information with other states about organizations that are not compliant. The primary reason you want to be compliant is because it’s state law, and there are penalties if you don’t comply. The risk of penalties arises as soon as an organization knows that it’s supposed to register but doesn’t. There may be “good faith” exceptions allowed here and there if you can make the case that you didn’t know you should register in a specific state. Still, it’s a much better approach to go ahead and register if you think you’ve triggered an obligation than to wait until an enforcement action comes to pass.
Among other things, organizations that are not compliant risk:
- State fines and penalties
- Possible civil and criminal action for officers and directors
- Unwanted attention and scrutiny from the IRS
- A loss of 501(c)(3) status, state tax exemption, or permission to fundraise in a specific state
- Bad publicity, damaged relationships, and a breakdown in trust with key stakeholders
We know this is quite a lot of complicated, sometimes surprising information, especially for organizations simply trying to do right by their population of residents! But being informed of the issues affecting your organization can help you make safer, more informed choices moving forward!