Updated February 07, 2022
As a nonprofit organization, one of the quickest ways to raise the ire of a state attorney general is to drop the ball on charitable solicitation registration. This means not registering to solicit funds in that state, failing to renew your registration annually, or hiring an unregistered third party to solicit funds on your behalf.
In recent years, attorneys general have picked up the pace with monitoring and regulating charities, so it’s important for your organization to get its compliance in order. Nonprofits that don’t register or keep up with annual renewals may face penalties, administrative or legal action, and the loss of their tax-exempt status with the state.
Currently, three-quarters of states require charities, fundraising professionals or both to register and file annual financial reports. Many nonprofits mistakenly assume that registration is required only for the state in which the organization is incorporated. The reality is that if your charitable solicitations have the potential to cross state lines, you may be required to register in multiple states.
In the eyes of a state attorney general, any invitation to make a donation — whether it’s via social media, your website, text, phone or old-fashioned snail mail — becomes a regulated activity. An attorney general may assume you are soliciting in their state if your website just has a “donate” button that can be accessed by residents of that state, for example. With that in mind, consider taking these steps to avoid trouble:
Start by checking on registration requirements with your own state attorney general or secretary of state. Then, check with the National Association of State Charity Officials to determine any other state(s) you may be required to register in and consider using the Unified Registration Statement (URS).
The most recent version of this standardized registration form facilitates registration with 40 different jurisdictions (39 states and the District of Columbia). However, please note that the URS filing is not accepted in all states. For more information, visit www.multistatefiling.org.
If you use fundraising consultants or professional solicitors or engage in commercial co-ventures to raise funds, you’ll need to make sure these third parties are properly registered and compliant with state requirements. You may also be required to submit a copy of your contract.
States typically require an annual renewal of your charitable solicitation registration, accompanied by your prior fiscal year’s financial documents. If your renewal is not submitted by the due date, monthly penalties begin to accrue.
In addition, your organization may have its state nonprofit tax exemption revoked and be prohibited from soliciting contributions in the state. Note that you can’t simply stop renewing your registration — you must officially withdraw your registration with the appropriate jurisdiction to avoid these fees.
State penalties can be high. In California, which substantially increased the penalties for noncompliance in 2016, each call, mailing or other solicitation constitutes a separate violation — regardless of whether it results in a donation. Penalties there may accrue at a rate of $100 per day until the violation is corrected.
California is not alone in penalizing organizations for failure to file, so penalties across multiple states can add up quickly.
If you have any lingering questions about your state registration compliance, contact our experts.
