What laws regulate fundraising?
Did you know that fundraising activities are regulated by state law? 39 states and the District of Columbia have laws that require a charitable nonprofit to register with the state before the charitable nonprofit engages in fundraising activities in that state. Lawforchange.org provides links to the fundraising laws in each state.
What is the risk of NOT registering for fundraising purposes?
Fundraising activities that are misleading could expose a nonprofit to civil fines in addition to criminal liability for fraudulent conduct. Rather than risk criminal liability (!) make sure that you understand what laws govern fundraising in your state and take extra care not to make any misleading statements in fundraising materials. Examples of what constitutes “fraudulent” conduct in the State of Arizona includes: “Misrepresenting that a solicitation is being conducted on behalf of a charitable organization” and “Misrepresenting that a person sponsors, endorses or approves the solicitation if the person has not consented, in writing, to the use of his or her name for the campaign.”
What else, besides initial registration, is required?
- 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. Twelve states require nonprofits to include a disclosure statement when communicating with donors: Colorado, Florida, Georgia, Illinois, Maryland, Michigan, New Jersey, New York, Pennsylvania, Virginia, Washington State and West Virginia.
- 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, such as bingo and raffles, used by some nonprofits use as fundraising vehicles, 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. Is it consistent with your nonprofit’s mission to support gambling?)
Are their special rules for strategic alliances that result in fundraising?
- Many state laws require nonprofits that engage in 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. Know your state law requirements!
For more information on state laws that regulate fundraising we highly recommend Nonprofit Fundraising Registration: The 50-State Guide.
Your State Association can serve as a resource if you need guidance on the specific requirements of your state.