Fundraising activities are regulated by state law. Many states require not only charitable nonprofits but also professional “fundraising counsel” / fundraising consultants to register with the state before the nonprofit engages in fundraising activities.
Note: this information is not intended as legal advice. We recommend you consult your nonprofit’s legal advisor if you have questions on how fundraising regulations affect your nonprofit.
The majority of states and the District of Columbia require a charitable nonprofit and/or professional fundraising consultants (sometimes referred to as "solicitors") to register with the state before the charitable nonprofit engages in fundraising activities in that state. Charities that solicit contributions in more than one state or on the internet or via social media may be required to register in multiple states. Some nonprofits use a common form, called the Unified Registration Statement, for that purpose, but we find that since so many states require their own state-specific forms, it is imperative to check each state's requirements. This is not the news you want to hear, but we suggest visiting the websites of the regulatory authority in your state for up-to-date information on what forms and filings are required: Find your state's charity official for more information.
Be aware that fundraising regulations are quite different state-to-state, and that no matter what medium your nonprofit is using (Twitter or texting, phone calls or old-fashioned snail mail) if the underlying activity is asking for a donation - that's regulated activity in many states. In addition to registration requirements, several states also require "disclosure statements" either verbally, or in writing, such as in solicitation messages or confirmation of pledges. This area is challenging for nonprofits that are grappling with it for the first time, so we've gathered some resources to give you basic background and to raise awareness about state law requirements.
Crowdfunding and other charitable solicitation risks (Nonprofit Law Blog)
50-state fundraising compliance guide (Harbor Compliance)
State registration requirements (Guidestar)
Excel chart of various state's charity registration requirements (Barb Welch Consulting)
Some nonprofits, and many religious organizations, are exempt from charitable registration requirements. State laws differ, so be familiar with the law of your state.This summary, prepared for the Evangelical Council of Financial Accountability, and shared with permission of ECFA and its author, addresses the special treatment of religious organizations in charitable registration regulations.
Failing to register, or engaging in fundraising activities that are misleading can expose a nonprofit to civil fines in addition to potential criminal liability for fraudulent conduct. Fraudulent conduct could include misrepresenting that the nonprofit has been recognized as tax-exempt, when in fact the charitable nonprofit has only applied for tax-exempt status.Rather than risk criminal liability (!) make sure that you understand what laws govern fundraising in your state and take extra care to file what is required, by the deadline, and not to make any misleading statements in fundraising materials.
After registering to fundraise, charitable nonprofits have other requirements to fulfill, potentially including renewing the initial registration in subsequent years (some states require annual renewal), acknowledging donations, and submitting periodic financial reports. Nonprofits should be aware of these potential state law filing requirements:
Disclosure statements: State law may require that your nonprofit include a “disclosure statement” on any written solicitation materials or confirmation of a pledge that the nonprofit has complied with any state registration requirements.. Read about state-by-state requirements for including disclosure statements (Perlman and Perlman Law).
Professional fundraising consultants: State law may require any professional fundraising consultant hired by your nonprofit to be registered with the state. While registration may not be the nonprofit’s obligation, it is important to verify that your fundraising consultant has registered, if required to. Read about special treatment for fundraising consultants and grantwriters.
Games of Chance: Some nonprofits use games of chance, such as bingo and raffles, as fundraising vehicles. However, such games are regulated activities that typically require a license from the local or state government (or both). Check your state law (and also consider the ethical issues involved—are games of chance consistent with your nonprofit’s mission to support gambling?) Review a summary of charitable gaming laws in the US.
There are also state laws that govern activities of for-profit businesses that give a percentage of their sales to nonprofits. (These arrangements are commonly referred to in the state laws as "commercial co-ventures.") State laws on commercial co-ventures vary widely, so be familiar with your state's laws that regulate fundraising. Your state association of nonprofits can be a resource on fundraising laws in your state.
There are also rules regulating various types of nonprofit-for profit partnerships, including corporate sponsorships and fiscal sponsorships. Many state laws require nonprofits that engage in ANY revenue-sharing activities, either with other nonprofits or with for-profits, report the shared-fundraising activity as a “commercial co-venture.” Whether or not your state requires that a written agreement governing the revenue-sharing be filed, it is very sound practice to draft a written agreement with the fundraising partner to memorialize the responsibilities of each party, and how the revenue will be split between the two (or more) parties. Most important is to know your state law requirements!
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