What Sets Attorneys General on the Warpath: Part 1

Keeping your state attorney general happy can be a challenge for nonprofit leadership. Armanino is pleased present the first article in a two-part series on key compliance issues for charitable organizations. (You can find part 2 here.)

Failing to Properly Register Your Nonprofit

One of the quickest ways to raise the ire of a state attorney general is to drop the ball on charitable solicitation registration. That means not registering to solicit funds in that state, failing to renew your registration or hiring an unregistered third party to solicit funds on your behalf.

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.

“A number of attorneys general assume you are soliciting in their state if you simply have a ‘donate’ button on a website that can be accessed by residents of that state,” explains Michelle Boyer, owner of Charity Compliance Solutions. Boyer’s company helps nonprofits navigate the complexities of charitable solicitation registration.
 
In the eyes of a state attorney general, any invitation to make a donation—whether it’s by Twitter, text, phone or old-fashioned snail mail—becomes a regulated activity. With that in mind, nonprofits may want to take these steps to avoid trouble:

• Get the specifics. 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 37 different jurisdictions (36 states and the District of Columbia). However, please note the URS filing is not accepted in all states. For more information, visit www.multistatefiling.org.
• Check up on professional fundraisers. If you engage a fundraising consultant, professional solicitors or engage in commercial co-venture 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.
• Renew to avoid penalties. 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. Note that you can’t simply stop renewing your registration—you must officially withdraw your registration with the appropriate jurisdiction to avoid these fees.

California Penalties are High

Many of our nonprofit clients are based in California, so we also want to ensure they’re aware that new regulations effective in California as of January 1, 2016, substantially increase the penalties for noncompliance. Each call, mailing or other solicitation constitutes a separate violation—regardless of whether it results in a donation. Penalties may accrue at a rate of $100 per day until the violation is corrected. For more details, download the full text copy of documents related to this amendment on the California Attorney General’s Office website here.

If you have any lingering questions about your state registration compliance, do not hesitate to reach out to your local Armanino expert. In part two of this series, we will discuss other common nonprofit practices that may set your state attorney general down the warpath.