When I start working with new clients or talk to nonprofits, the following issue comes up every now and then. Thank you to James Gilmer of Harbor Compliance for his guest blog on this important issue!
Fundraising is Good, but Compliance is better!
Fundraising is the lifeblood of most nonprofits. Whether it’s by monthly, annual, or one-time gifts, few organizations can survive without critical donations. While your organization may be going to all lengths to raise funds, you must not overlook the importance of fundraising compliance.
About forty states and DC currently require nonprofits to register with the Attorney General, Secretary of State or other state authority prior to asking for donations. Simply having a 501(c)(3) exemption from the IRS is not enough! Fundraising registration is a separate task done at the state level. Compliance with your state’s (or nationwide) charitable solicitation laws protects citizens from illegitimate and unregulated charities, and can inspire prospective donors to support your mission.
By registering, you inform the state and the public of your nonprofit’s operations, leadership, and financial information. Registration typically involves filing an application with each state where you fundraise, along with the registration fee and a variety of supporting documentation, including your IRS determination letter, articles of incorporation, bylaws, and financial information. Depending on the state, you may also be required to appoint a registered agent and foreign qualify.
Because each state has different requirements, managing fundraising compliance gets more complex as you solicit in multiple states. In almost every state, you must renew your fundraising registration annually, so tracking due dates and filing in every state on time becomes a time-consuming task for nonprofits of all types. Remember, there are service companies that can manage annual filing projects and simplify renewal tracking.
Ideally, registration happens before you solicit funds in a given state; that is, before you even ask. If you have already solicited or raised money without registering in that state, you must comply with applicable state requirements. In other words, consider registering where necessary to avoid penalties for soliciting without a fundraising license.
If you do online fundraising using crowdfunding platforms or a “Donate Now” button, you must follow separate guidelines. Technically, you are soliciting funds in every state, meaning you have to comply with applicable registration requirements in more than forty states. Think twice and seek outside assistance before you ask for donations online!
If there any doubts to whether you invest in compliance, consider this. First, registration and compliance are state law, with penalties ranging from monetary fines to loss of tax exemption. Second, the IRS wants to know where your charity solicits donations, and you disclose this information annually on your nonprofit’s 990 tax return.
Most importantly, fundraising compliance adds credibility to your organization. Foundations, corporations, and private donors may request your registration status at any time. Before giving, they can also use the state’s registry of charities to look you up! Registering before you solicit funds helps reassure your donors that your mission and programs are legitimate, and inspires them to give.
Fundraising compliance is a detailed subject, and your organization has its own specific needs. Continue reading this fundraising compliance guide to help you understand registration guidelines in your state. Remember, by investing in compliance, your donors are more likely to invest in your nonprofit!
Author Bio: James Gilmer is a compliance specialist for Harbor Compliance, which establishes 501(c) nonprofits and helps them stay compliant. Harbor Compliance assists charities in every state and several countries abroad. James serves on the Board for two nonprofits in Lancaster, Pennsylvania.
Thank you James, this is a great resource to have!
And, if you’d like to find out how to grow your monthly giving program, just contact the Monthly Giving Help Line . It only takes one extra new monthly donor to pay for it! You can’t beat the price.
Or schedule some time for a Direct Response Audit, you will not be disappointed!
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