Top 5 Tips for Understanding State Requirements When Soliciting Charitable Contributions [Blog Post]
January 7, 2016
In the following “Expertise Beyond the Numbers” blog post, Rachel Andujar, a Manager with SC&H Group’s Tax Services team, discusses how to best meet state compliance requirements when soliciting charitable contributions.
Fundraising activities are regulated by each state. Most states require a charitable organization – as well as any paid professional solicitors – to register with the state before the organization or the professional fundraiser solicits any donations.
For example, ABC Organization sends out an email blast to thousands of its readers to kick off its new fundraising campaign. ABC Organization then follows up with a paper mailing, multiple phone calls, and concludes with a posting on its Twitter and Facebook account. Unknowingly, this campaign may require the organization to register to solicit contributions in the 40 states that require registration.
Failure to register is a violation of law, and could subject ABC Organization to fees and penalties that exist in each state’s statute. Fortunately, states generally encourage good faith efforts to become compliant. In this example, the organization should register as soon as possible to avoid or minimize sanctions.
With the influx of online fundraising activities, organizations can easily and mistakenly cross state lines. Even if this detail is a minor oversight, organizations are still responsible for being aware, and complying with, each state’s filing requirements.
Here are 5 top tips for understanding state requirements, and minimizing the risk of non-compliance:
- Know that many states have varying filing thresholds and exemptions.
Thresholds and exemptions vary greatly by state. The District of Columbia has a filing threshold of only $1,500 while Washington’s threshold is $50,000 when all activities are performed by volunteers. Many states offer exemptions for religious institutions as well as educational institutions, organizations that only solicit from their members, and certain tax-exempt healthcare institutions.
- Be aware of renewal registration requirements, disclosure statements, and other additional required filings.
Once an organization has completed the initial registration, many states require specific renewal registrations, annual fees, disclosure statements for contributors, and other additional required filings. When registering in a state, these filing deadlines and fees should be tracked to remain compliant.
- Use the Unified Registration Statement (URS) for multistate filing requirements.
The URS allows an organization to consolidate data filing requirements, and is currently accepted by 36 states and the District of Columbia. An organization can complete the URS and attach any additional state specific forms instead of completing a charitable solicitation registration state by state. The Multistate Filer Project provides helpful information for regional or national fundraising campaigns.
- Conducting an online fundraising campaign? Read the Charleston Principles.
The National Association of State Charity Officials has adopted guidelines on charitable solicitations using the Internet called the Charleston Principles. These guidelines offer information on “passive” solicitations and what constitutes “repeated and ongoing” and “substantial” solicitations.
- Take action – late registration is better than willfully ignoring the requirements.
If an organization starts a fundraising campaign without properly registering, most states are understanding and accept a good faith and honest effort to become complaint. Do not ignore the filing requirements, and attempt to register as soon as possible.
Understanding the filing requirements and thresholds for each state when soliciting contributions can be a daunting task. The initial charitable solicitation registration, along with subsequent required filings, can create a substantial amount of additional work for many organizations.
SC&H Group’s Tax Services team can help many organizations reduce the work – and complexity – involved in this area. To learn more about how to comply with each state’s filing requirements, please contact Rachel here.