9 Surprising Facts about Out-of-State Fundraising Registration
Nonprofits cannot just start asking people for donations. That's especially true if the nonprofit is wandering into states other than their own to find donors.
And what organization is not doing that these days?
Fundraising registration is a complicated affair. That's why several companies have started helping charities with these complex and sometimes baffling rules.
One of those companies is Harbor Compliance. To help demystify the registration process, or maybe to illustrate how devious the whole thing is, Harbor Compliance designed an infographic highlighting some of the facts about registration.
Here are some of those facts that I'm betting many charities might not know and even find shocking about fundraising registration:
- It's hard to escape. Forty states require charities to register with them if the charity fundraises there. Thirty-nine of those states require registration before soliciting donations and regardless of whether any contributions are received.
- Some states are stricter than most. Among those are Florida, Pennsylvania, New Jersey, and New York. Register in those states if there is any possibility that you will be fundraising there. Because of the volume of donations coming out of Texas, California, and Illinois, most charities should register in those states as well.
- There is limited conformity. The URS (Unified Registration Statement) does make multi-state registration easier, but only 32 states accept it, and 13 of those require some supplementary information. Eight states do not accept the URS.
- Online fundraising is just as vulnerable. Seven states consider you to be actively soliciting donations if you just have a donate now button on your website. You don't even have to be sending out letters or emails asking for donations.
- Make sure you are registered to fundraise in the state where you operate plus in any other states where you solicit donations or from which you receive donations "on an ongoing basis." Do you have monthly donors out-of-state? Better register there.
- Crowdfunding counts as fair game too. Most states require registration if you "crowdfund." So, if you set up a fundraising site on a third party platform (for instance NetworkforGood) that raises money anywhere anytime, make sure to register everywhere. Don't depend on the third-party platform to take care of this.
- The IRS is watching. Charities have to disclose all the states in which they are registered to fundraise on Form 990, the annual tax document nonprofits submit to the IRS. The 990 is publicly available, so there is no hiding.
- Registration may cost. Charities have to pay a fee to register in some states. Fees range from nothing to an average of $35 and can be over $400. The states set the fees and they vary according to the revenue of the registering charity.
- Not registering can be more expensive. Not registering when required to do so can result in fees and penalties. Worse, even officers and directors can be held legally and financially liable.
- You might be exempt. Some states may exempt religious groups, schools, hospitals, and small charities from registration.
So, let's all agree that fundraising registration is complicated, and it is a moving target. For instance, there is a possibility that the Unified Registration Form will become obsolete.
What should your charity do?
- Register in the state where you are incorporated.
- Evaluate your fundraising. Are you sending direct mail or email solicitations to out-of-state prospects? Do you regularly receive donations from out-of-state?
- Check out the Unified Registration Statement. Can you use it to cover most of your out-of-state fundraising needs?
- If you crowdfund through third-party platforms, does that organization help or cover out of state registration? Ask them.
- Consult with or use the services of specialized companies that can help. Here are a few to consider:
For do-it-yourself help, I recommend Nolo’s Nonprofit Fundraising Registration: The 50-State Guide