Are you up to date on your state registration and reporting? It’s estimated that as many as 90% of nonprofit organizations failed to register to solicit funds in one or more states, even though they were required to do so by state law.
The IRS and state governments are taking notice.
Crossing State Lines
It’s easy to get tripped up on state registration and reporting because state laws governing charitable solicitation registration aren’t consistent.
Most states and the District of Columbia require charitable nonprofits — and any consultants hired to fundraise — to register with the state before solicitations are made. Note that it is the solicitation, not the receipt of funds, that triggers the charitable solicitation registration requirement.
When you were exclusively sending out solicitations by mail or had a phone list, you had more control over where your solicitations would occur. But fundraising methods have changed dramatically thanks to social media and the internet.
What’s a Solicitation?
Does the “Donate Now” button on your website constitute a solicitation? What about that clever local fundraising challenge that goes viral?
Here are a few points to consider:
Forms and requirements vary widely from state to state. While some states use a common form, they frequently ask for additional information or have unique signatory requirements. It’s best to visit each state government’s website for specifics.
Simply registering in every state might not be the best approach. Paying registration fees and renewals, plus preparing the forms, can be significant. Also, if you decide to stop soliciting funds in a state in which you are registered, you may need to inform that state.
There are exemptions in most states for educational institutions, nonprofit hospitals, charities that only solicit members, religious communities and very small nonprofits. But even these organizations may still have some registration burden.
Most of the information required is on your IRS Form 990. Because of this, some nonprofits rely on their CPAs to manage the registration and renewal process. Additionally, there are firms specializing in charitable registrations and fundraising. Of course, if you outsource any of your fundraising, ensure that your partner is registered properly.
Some fundraising websites can be sensitized to the organization’s geographic solicitation profile to remove solicitations for states you aren’t registered in.
The unfortunate reality is that if you are required to register but you don’t, you might be penalized. You can be required to return donations, pay a penalty, or both.
To reduce hassle and increase compliance, several organizations are currently attempting to create a universal application for state registration. Until that happens, let us help you. Fill out the form below and we’ll get back with you about your organization’s registration requirements.
Disclaimer of Liability
Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisors. Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability and fitness for a particular purpose.