Fundraising from America - A Guide to State Registration (New look slides)

Fundraising from America:

A Guide toState Registrations

Presented by Chapel & York Limited

A Guide to State Registration

Are you sure you know all about this often-misjudged requirement that is fast

becoming one of the most common Noncompliance issues when Fundraising

from America?!

Today we will be covering…


- State Registration - Why Now?- State Exemptions.- States you do not need to worry about.- The Charitable Solicitation Act.- States you should consider registering in.- Penalties.- Online solicitation – The Charleston Principles.- How to Register.- Annual State Renewals.- Professional Solicitors / Fundraisers / Counsel.- How to decide which state your non-profit should register in.


When you first setup your non-profit in the US you incorporated your organisation in one of the fifty states or the District of Columbia. Then you applied to the IRS for exemption from federal income tax. This exemption however only proves your organisation is exempt from federal income tax in all states and DC. It does not cover exemption from state registration, only the state you are actually incorporated in.

Typically in the past only large non-profits would be able to fund state-wide fundraising and smaller non-profits would fundraise locally in their own state. Thus, it was only the larger non-profits that had to worry about registering outside their one state. Small non-profits usually never had to deal with the expensive and time-consuming burden of multistate registration.

So let us go back to the beginning…


Today, however, even the smallest non-profit can reach a nationwide audience through an website or email, and collect contributions from donors location anywhere in the country. Consequently, many small non-profits that have never had to deal with registration other than in their home state must now figure out where and how to register in multiple states.

So let us go back to the beginning…


Nevertheless, until recently all but the largest non-profits that solicited contributions nationwide tended to ignore state registration requirements.

As many as 90% of all non-profits failed to register in one or more states even though they were required to do so by law.

Typically nothing happened because most states lacked the manpower and desire to enforce their registration laws. However this is changing. It is imperative for all non-profits to comply with state registration laws. If you don’t you run the risk of unwanted attention and scrutiny from the IRS and states, and potential problems with donors.

Why Now ?


Tax Returns Makes Nonprofit Fundraising Registration Unavoidable

Due to IRS expanding on reporting requirements for the annual tax return (Form 990) among other things the Form 990 now requires numerous disclosures about compliance with state non-profit laws, including those concerning non-profit fundraising registration.

State filing fees good source of income

With shrinking state budgets, state registration fees and late filing fines are a now potentially lucrative source of income. States can find out by reviewing the Form 990 or a donor could even enquire to the state which can be a tip off to a state.

Why Now ?


All states exempt certain types of non-profits from registration. These usually include educational institutions, hospitals, religious entities and organisations with limited income. However the definitions for each of these differ from state to state, so where one organisation is exempt in one state they may not fall within another state’s definition of exemption. 28 states grant exemptions to non-profits that have income of less than a specified amount. In 16 states the threshold is $25,000 which means total income for the year across the whole of the US. However in New York you only count contributions from New York state residents and government grants. Michigan grant exemptions to non-profits that receive contributions from 10 or fewer people during the year.

State Exemptions


28 states grant exemptions to non-profits that have income less than a specified amount.

State Exemptions


Arizona, Delaware, Idaho, Indiana, Iowa, Montana, Nebraska,South Dakota, Texas (requires only public safety, law enforcement and veterans’ organisations to register), Vermont & Wyoming.

States you don’t need to worry about


What type of solicitation trigger registration requirements?

Basically the state rule is that any non-profit that makes or intends to make, a charitable solicitation within a state that requires registration must register with that state. Charitable Solicitation is defined broadly to include any request for a contribution by a non-profit in which: - An appeal is made for a charitable purpose. - The name of a charitable organisation is used or a statement is made that

implies that all or part of the donation will be applied to a charitable purpose or donated to a charitable organisation.

Remember the registration requirement is trigged by asking for donations – it is not necessary that your non-profit actually receives a donation.This means that should register in any state before you actually solicit there (except California which requires registration within 30 days of receiving a donation)

The charitable solicitation act


40 states plus the District of Columbia have opted for what is known as “the charitable solicitation act” and require non-profits that solicit donations in their jurisdiction to register with the state agency.

The charitable solicitation act


As almost half the population of the United States resides in just ten states that require registration.

These are:California, New York, Florida, Illinois, Pennsylvania, Ohio, Michigan, Georgia, North Carolina and New Jersey.

Where is it worthwhile to register ?


If you don't register in a state where you are required to, you are breaking that state's law. States may impose fines and other penalties on non-profits that fail to register. These fines can be substantial. For example, Pennsylvania imposes a minimum $1,000 fine for failing to register. the state may order your non-profit to cease soliciting donations within the state until you register there. Some donations have had to be given back as a result of not registering or registering too late.

The Board of directors in some states can be held personably liable for not registering in a state. If you have already solicited donations in one or more states where you should have registered, you should go ahead and register where you need to. Some states establish periodic amnesties in which non-profits are allowed to register late without any penalties applying.

Penalties


The National Association of State Charity Officials (NASCO) has issued detailed guidelines on when the existence of a website alone should give rise to an obligation to register with a state. These guidelines are called the Charleston Principles. Under these guidelines, registration in a state is required only if:

- the non-profit's website is used to make charitable solicitations, and- the non-profit has sufficient fundraising contacts with state residents, whether through the website or by other means.

Online solicitation – The Charleston Principles


Interactive websiteAn interactive Web site is a Web site that permits a contributor to make a contribution, or purchase a product in connection with a charitable solicitation, by electronically completing the transaction, such as by submitting credit card information or authorizing an electronic funds transfer. General Exclusions Maintaining or operating a Web site that does not contain a solicitation of contributions but merely provides program services via the Internet—does not, by itself, invoke a registration requirement. For example some non-profits list a contact email for a donation form. Because the form is emailed and then completed manually it is not deemed “interactive” .



It is important to remember that these guidelines are not legally binding on any state. Nevertheless, with some important exceptions below, most states follow the Charleston Principles. Colorado and Tennessee - have incorporated the principles directly into their charitable solicitations law. New York and New Jersey however do not follow the Charleston Principles.

Each state also seems to have a separate body of case law interpreting whether a “donate here” button or online campaign is enough of a “nexus” or “presence” within a particular state to trigger that state’s registration requirements.

If you accept online donations, do register in Florida, New York, Pennyslvania and New Jersey state, even if you don't solicit there. Those states require registration for simply accepting a donation from the state.



Registration involves filing an application with the appropriate state agency and, in most states, paying a registration fee. You'll usually have to provide financial information with your application. Often, this can be a copy of your most recent Form 990 (Tax Return). Registration usually consists of two parts: an initial registration application and an annual renewal. There is a Unified Registration Statement (URS) a form which can be filed with most states, however the form has to be notarised which is an additional cost for the non-profit. If using the URS often states require supplemental forms and of course the financial information. Therefore most nonprofits tend to use the state designated registration form and file it with a copy of the Form 990.

How to Register


Certain states require a Registered agent to be appointed in their state. A registered agent can be an individual or a company residing in that state. A registered agent is required for what is known as service of process. Basically it is someone that would accept important documents on behalf of your organisation in that state. You have a registered agent in your state of incorporation and if required Chapel & York can assist with a firm for other states. Some states require a Certificate of good standing, you can obtain one from your state of incorporation for around $50, this as proof you are current and compliant with that state.

How to Register


In all states annual financial reports are required in hand with registration renewals. The financial report contains detailed financial information on the organisation including balance sheet, statement of support, expenses and a breakdown statement of functional expenses. In most states a copy of the IRS Form 990 will suffice however in certain states audited financial statements are required and this is an additional cost to the non-profit organisation. Audits costs can be between $3,000 to $6,000 whereas accountants reviews can be around $2,000. State filing deadlines differ for all the states and extension of time to file renewals and annual reports are permitted in pretty much all states. 13 states require disclosure notices to be displayed on all solicitation material.The disclosure notice notifies donors that information on the organisation can be obtained from the state concerned or from the organisations website.

Annual State Renewals


A Professional fundraiser is any outside professional person or company hired by a non-profit to help with fundraising. They are not employees of the non-profit. Professional solicitors are people paid by the non-profit to directly solicit contributions from the public, through door to door soliciting, event marketing or any other type of direct solicitations. Fundraising consultants are also known as fundraising counsel and they help non-profits plan or manage a fundraising campaign. Direct marketing firms often fall into this category. An outside grant writer hired as an independent contractor to help write a grant request would also be fundraising consultant. If any of the above are going to be engaged, check that they are already registered in the state as it is a state requirement that they register themselves and you declare them on your annual financial information such as Annual state reports.

Professional Solicitors / Fundraisers / Counsel


Unless you receive at least $250 in total state donations each year it makes no sense to register because of the cost of registration will exceed the value of donations, however remember certain states require registration for merely asking for contributions that trigger state registration. Basically the rule is that any non-profit that makes or intends to make, a charitable solicitation within a state that requires registration must register with that state.

Worthwhile looking at the states where existing donors are located.

To Register or not to Register ?

A summary of today’s webinar:

Here is some basic information and tips about fundraising registration. Be aware, however, that you'll need to do your homework on this issue and/or get legal advice for your particular non-profit.

- Register before you start fundraising.- Register in every state where you solicit funds. If you receive less than $250 in donations from a particular state, don't register and do not send postal mail or email to that state- 38 states do accept the Unified Registration Form, but they often differ in the documentation that they require. So you can't just submit one registration to all of those states and forget it. You'll need to customize each registration with the required documents.- In most states that require registration, you also have to renew annually. Each state's requirements are different and deadlines for renewal vary. Fees for registration differ state to state.- If you do not register properly in other states before you fundraise, your organization risks penalties and even felony charges. Some donations have had to be given back as a result of not registering or registering too late.

All information supplied can be subject to change as the states often update their sites on a yearly basis.

Review


This information was not intended to be legal advice. It is advised that you consult your own legal expert in regard to your specific situation.

that’s it!

for listening.

Date post:	17-Aug-2015
Category:	Education
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Fundraising from America - A Guide to State Registration (New look slides)

Education