When must an organization register?
By law, nonprofits are generally required to register prior to conducting solicitation activities or receiving funds within a state. For fundraising consultants, commercial co-venturers and professional solicitors, registration is required prior to the commencement of services. Organizations must renew their registrations each year prior to expiration.
Are there any groups that are exempt from registration?
Depending on the state, an organization that raises less than $5,000 – $25,000 may be exempt. There are also exemptions given to particular categories of nonprofits. For instance, in many states, schools, hospitals and religious organizations are generally exempt. It is important to note, that many states continue to re-define which groups qualify as exempt (What is the definition of a “religious organization”? What does it mean to be an exempt “school” in a particular state? What constitutes a “bona fide member”?). A number of states will require the organization to apply for exemption by filing forms and providing other organizational documents. Our attorneys can assist in helping you determine if you qualify for an exemption.
How does a state become aware that an organization is soliciting unregistered in their state?
States discover noncompliance in a few different ways. The most common is when a consumer makes either an inquiry or complaint to the agency that regulates nonprofits in that state. Some states get their employees names “seeded” into direct mail or telephone solicitation lists that are purchased by nonprofit organizations. The states are increasingly seeking creative and ingenious ways to uncover noncompliance.
If I have been soliciting contributions prior to becoming registered are there any penalties I will incur?
All states have the right to impose fines and penalties on those who solicit without registering in their state. States may impose fines for failure to register in previous years; more commonly, some states will require multi-year filings. Failure to register may result in the revocation of solicitation privileges in the state. Furthermore, board members may be liable for your organization’s wrongdoings under the principles of fiduciary liability. On top of all this the IRS has stepped in. The IRS Form 990, which non-profits must file annually if they raise over $25,000, asks questions about your compliance with registration laws in states where you solicit. The 990 is signed by an officer under penalties of perjury.
Is registration required in all 50 states?
All but five (5) states require some form of registration. Currently, 44 states (including Washington, DC) require nonprofits to register (depending upon the nature of the organization and/or its solicitation activities), while 43 states require professional fundraisers to register, 32 states have provisions in their statute for fundraising consultants and 4 require registration for commercial co-venturers. Specific forms and practices vary from state to state. Our firm works closely with regulators to make certain we are current with their requirements and file all applications and accompanying documentation properly and professionally.
Do I need to register if I am only making internet appeals on our nonprofit’s website?
Organizations that provide an opportunity to donate through their website should be registered to solicit in the state in which the organization is located. In addition, solicitations targeted at a state’s residents (e.g. direct mail, TV, or radio solicitations) which ask individuals to donate require registration in the state (even when the individuals are asked to make their donation online).
Beyond this, organizations may need to register in certain states based on the amount of donations they receive online from residents of those states. To date, only Colorado, Mississippi and Tennessee have specific provisions in their laws that define when (based on volume and frequency) online donations received from their states’ residents will trigger the registration requirement. The constitutional principle of “minimum contacts” (the minimum amount of contacts necessary for a state to exercise jurisdiction over an entity) is the basis for the state laws that specify the amount of online donations that will trigger the requirement to register.
The attorneys at Perlman & Perlman can assist you in analyzing your online fundraising registration and compliance obligations.
What are the yearly registration fees for a nonprofit?
Costs vary from state to state. What category the organization falls into will influence the fee (nonprofit, consultant, etc.) Furthermore, some states have sliding scales based on income. A nonprofit should expect to pay $1,700 – $3,600 for an initial national registration. In addition, there may be expenses incurred to have an accountant prepare the financial audit which is required in many states above certain revenue thresholds.
Do I need a registered agent?
There are currently four jurisdictions (Colorado, Michigan, North Dakota and Washington, DC) that require soliciting organizations to have a registered agent if they do not have an office in the state. A registered agent is a legal representative who is entitled to receive official communications. Other states will accept an individual within the organization and/or the state’s Secretary of State as the registered agent. If needed, our firm can make arrangements for you to obtain a registered agent in the applicable jurisdictions.
What documents do I need to provide?
Basic information will be required (i.e. list of officers and directors, mission statement); as well as some corporate documents (i.e. By-Laws, Articles of Incorporation), the organization’s completed IRS tax form and, depending on revenues, audited financial statements. In addition, any current fundraising and charitable sales promotions contracts must be filed.
Is anyone qualified or able to assist me with fundraising contracts?
Yes. Perlman + Perlman is a law firm with extensive experience in philanthropy and charitable giving. The nonprofit fundraising registration and compliance department is one department of our firm. The firm’s attorneys can assist you with negotiating and preparing fundraising contracts and other legal matters, as well.