Soliciting Charitable Donations? Know The State Rules.

October 2, 2019

When you first formed your nonprofit, you probably knew that you’d have to learn the state procedures and requirements for any organization that performs charitable activities and solicits charitable donations. These state mandates, of course, are in addition to the federal granting of tax-exempt status. Currently, they are in force in 39 states and the District of Columbia.

Starting and maintaining a nonprofit entails knowing all the rules and completing a large amount of paperwork accurately. Failing to do so can mean losing your tax-exempt status and the ability to operate in your state.

Although state requirements vary, you’ll usually be asked to provide (either online or via printed forms) a registration statement (basic information, governance, financial statements, etc.), supporting documentation, and possibly a filing fee as well as additional documents.

Every State Counts

Even if you’ve registered in your own state, you’re not done. You’re also required to register in every state where you solicit funds. And, in some states, you must continue to renew your registrations. Many nonprofits aren’t aware of this, and if you’re one of them, you’ll want to get up to speed on the registration and filing requirements of every state where you ask for money, and quickly. That includes every method of communication, not just fundraising letters.

Are you making personal requests? Sending emails or Tweets or texts, or making phone calls? They all count. The National Association of State Charity Officials (NASCO) website contains links to contacts in every state here. The IRS also offers this list of links to state government websites that provide information to tax-exempt organizations.

If this sounds like it could get expensive, it can. You have to consider filing fees and the cost of your time spent on paperwork. So, it behooves you to know what’s expected of you ahead of time. We can help you with that.

The Web’s Long Reach

What about a fundraising website or other online presence that might reach individuals in many states? Are you expected to anticipate that and register in those states?

Although NASCO adopted a non-binding set of principles on this question in 2001, it’s ultimately up to your state to provide guidance on this issue. You should at least register:

  • In your state of incorporation.
  • In any state where you have a physical presence.
  • In any state that you target, or where you have ongoing contact with residents.
  • In any state where a website is drawing donations in volume (you should monitor your site for such activity).

Some Exemptions

Some organizations may not have to register. These include many religious and educational groups, as well as those that only solicit from their membership or whose donations fall below a specific dollar threshold. Even if you believe that you’re exempt, you may have to apply formally for exemption status.

Just Beginning?

Are you considering forming a nonprofit organization and are confused about where to start, we can help. If you’ve already launched a tax-exempt body and want to make sure you’re in compliance with both federal and state requirements, we can help there, too. Contact us to set up a consultation.

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