Navigating the Complex World of Non-Profit Charitable Solicitation: Why Compliance Matters
Please note: This blog is current to the date of its publication, August 20, 2023. For more recent updates, contact SST’s experts.
Most non-profits rely on grants, donations and fundraising activities to fund their mission and make a positive impact on society. However, what often goes unnoticed are the regulatory requirements that must be met to solicit donations and conduct fundraising activities in each state. This blog post sheds light on the importance of compliance with charitable solicitation laws, which vary from state to state.
Understanding the Landscape
Did you know that forty-one jurisdictions in the United States require registration for charitable solicitation, and twenty-six of them require non-profits to disclose specific information in their fundraising materials? This regulatory landscape is complex, and it can be overwhelming for non-profit organizations to navigate. The key point to remember is that in most states, it’s not the receipt of funds but the act of solicitation itself that triggers compliance requirements.
Expanding the Definition of Solicitation
The definition of solicitation has evolved with technological advancements and the rise of social media platforms. It’s no longer limited to traditional methods like direct mail and phone calls. Today, solicitation can include:
- Email and Direct Fundraising – Sending out appeals for donations via email or physical mail
- Social Media Fundraisers – Leveraging platforms like Facebook to raise funds for a cause
- Virtual or On-Site Fundraising Events – Hosting events, whether in-person or online, to collect donations
- Incorporation of “Donate” Buttons on Websites – Making it easy for website visitors from around the nation or even internationally to contribute
- Grant Applications – Applying for grants from foundations and organizations
- Fundraising Phone Calls – Making calls to potential donors to seek support
- Crowdfunding – Using crowdfunding platforms to raise funds from a large number of people
State-Specific Requirements
Charitable solicitation registration is a state-specific process, and the requirements can vary significantly from one state to another. Non-profits typically need to submit the following during registration and annual renewal:
- State-Specific Application
- Current Listing of Board Members and Key Executives
- Form 990 and Financial Statements
- Organizational Records and Corporate Documents
- State Filing Fees
Navigating Exemptions
Certain organizations may be eligible for exemptions in multiple states, which can reduce registration fees. It’s crucial to identify which states allow exemptions and whether your organization qualifies. Factors influencing exemption eligibility can include location, gross revenue, and purpose (e.g., religious organizations, hospitals, schools). Some states may require exemption filings instead of registration filings.
The Importance of Compliance
State charitable solicitation laws exist to protect donors from unregistered, misleading, and fraudulent activities. Non-compliance can have serious consequences, including:
- Fines and Penalties
- Negative Public Image
- Civil and Criminal Action against Officers and Directors
- Lost Donations
- Denial of Fundraising Rights
Taking a Proactive Approach
It is the responsibility of management and the Board of Directors to ensure compliance with state charitable solicitation registration requirements. Taking a proactive approach not only ensures legal adherence but also increases donor trust and minimizes risks associated with fundraising strategies.
SST Accountants & Consultants has over 30 years of experience in providing tax, audit, and business advisory services to non-profits. We are here to help your organization navigate the complex world of charitable solicitation compliance. Contact us today to take proactive steps toward protecting your organization and ensuring its long-term success.
