On today's episode we will cover Charitable Solicitation Registration! If your nonprofit asks people for donations, you probably need to register with state regulators before you make the ask, and the rules are different in every state. We'll break down what charitable solicitation is, how it differs from your IRS tax-exempt status, what the most common misconceptions are, and what organizations should do to stay compliant with these laws. Today we are thrilled to be joined by our BA Summer Legal intern, Lina Zuluaga. On this Episode Brittany Leonard Tim Mooney Lina Zuluaga (Legal Intern) Shownotes: Opening: Intros (, Brittany, ) 1. - Intro about a. Lina's summer internship experience 2. - Starting with the basics: What is charitable solicitation and why does it exist? a. Charitable solicitation registration is a state law consumer protection requirement i. It is not a federal obligation ii. States require organizations that ask the public for charitable donations to register with a state regulator, usually the Attorney General or Secretary of state, before they begin soliciting b. The purpose is fraud prevention and transparency, not taxation. i. States want to know who is asking their residents for money and how those funds are being used. c. Roughly 40 states, plus D.C. have some form of registration requirement. About 10 states have no general charitable solicitation law. T[LZ1] [BL2] hese states don't have a general pre-registration requirement, though some still impose disclosure or other obligations i. States with no registration requirements include Delaware, Idaho, Indiana, Iowa, Montana, Nebraska, South Dakota, Vermont, Utah and Wyoming. ii. States with limited, or conditional registration requirements include Texas and Arizona. Their requirements are triggered by fundraising activities rather than a charitable solicitation act. d. The key definitions to understand: i. Solicitation: a request for a contribution for a charitable purpose, through any medium. 1. Example: sending mail to citizens of a particular state, asking them to donate to your cause! ii. Contribution: a gift of money or property 1. Example: receiving a check in the mail from a new donor you've never contacted! 3. -Three registrations commonly confused: IRS tax exempt status, state business registration, and charitable solicitation registration a. IRS 501(c)(3) determination – refers to federal tax-exempt status. The organization is exempt from federal income tax, and donors can deduct contributions. i. Tax exempt status on its own does not authorize fundraising in every state. b. State business registration – is required when a nonprofit has a presence or does business in another state. It's a corporate filing with the Secretary of State. c. Charitable solicitation registration – separate, additional obligation triggered by asking for donations. Many states require nonprofits to submit their IRS determination letter as part of the state registration, underscoring that federal status is a prerequisite, not a substitute. d. Myth #1 – Tax exempt status gives you nationwide solicitation coverage i. Scenario: A newly formed 501(c)(3) receives its IRS determination letter. The board treasurer says: "Awesome! We're good to fundraise everywhere now!" Is that right? ii. No! That's a common misconception. The IRS determination letter means the federal government recognizes the organization as tax-exempt. It says nothing about whether you can legally ask for donations in California, New York, or any other state. There are separate state-level obligations with their own applications, fees, and renewal deadlines to be aware of. e. An IRS determination letter is not a license to fundraise. Federal tax-exempt status and state solicitation registration are separate legal obligations. 4. - Common misconceptions (FAQs) a. - Do I need to register in every state we receive a donation from? For example, my nonprofit is based in Florida, and I receive a donation from someone in Indiana. i. - No. Receiving a donation is not the same as soliciting one. Registration is triggered by making the ask, not by the receipt. ii. - Also, Indiana is one of the states that doesn't have a charitable solicitation registration requirement. So, in this instance, registration wouldn't be required either way. iii. – But this analysis would be different if the donation came from New York after you specifically solicited New York residents. Sending fundraising emails to residents there triggers New York's registration requirement. b. How about if we have a donate button on our website. Do we need to register in all 50 states? i. - The leading guidance comes from the Charleston Principles, developed in 2001 by the National Association of State Charity Officials, or NASCO. ii. - Under the Charleston Principles, a nonprofit generally needs to register in a state if its website specifically targets residents of that state, or if it receives contributions from that state on a repeated, ongoing, or substantial basis. iii. - A purely passive website with a donate button that isn't targeting any particular state generally wouldn't trigger registration everywhere. iv. – That said, the Charleston Principles are guidance, not law. A small number of states including Colorado, Tennessee, and Mississippi, have enacted administrative regulations that mirror the principles' framework with specific numerical thresholds. In those states, the parallel rules are binding law, but their legal force comes from the state rulemaking process, not from the Principles themselves. v. – the practical takeaway for organizations is that the Charleston Principles are a useful starting point, but they are not a safe harbor. You cannot point to them as an excuse for not abiding by state regulation. If you're doing active online fundraising, email campaigns to donors in other states, or geo-targeted advertisement seeking donations in another state, that's going to look a lot more like solicitation than a passive donate button on a website. c.
