Fundraising Regulations: An Overview

Does your nonprofit comply?

When your Christian nonprofit organization raises funds, the process may not be as simple as sending a persuasive letter and depositing checks. Because soliciting donations—or even just accepting donations—can be considered regulated activity, you may be required to register with government entities before fundraising in certain states.

Different places, different rules

Registration requirements may vary based on where the donor resides. Some state and local laws are so lax as to not require any action; others are so strict as to require applications and fees from nonprofits. Here is a sampling of the different requirements you may encounter:

• No Requirements: Some states, such as Indiana, Montana, and Arizona, do not generally require nonprofit organizations to apply or file with the state when soliciting or receiving money from that state. However, local governments within these states may still impose requirements. For example, in Montana, some local governments require nonprofit organizations to register if they solicit in person. And in Indiana, a professional fundraiser consultant may need to register while the charitable organization does not.
   
• Application Required: Several states require nonprofits to register but not always ask for a fee. Florida and New York are two states following this approach. Typically, applications are required prior to soliciting or receiving money from individuals in that state.
   
• Application & Money Required: The third category of states requires nonprofits to submit registration forms, typically with a processing fee. For example, California compels charitable organizations to register with the state within 30 days of receiving money while in the state or from an individual in the state. The application must also be accompanied by the mandated fee.

Additional Resource

• Harborcompliance.com's Fundraising Compliance Guide has information that is state specific.

Disclosure statements

About half of U.S. states require nonprofits to include disclosure statements in their solicitations. That means you may need to include specific wording on fundraising items such as:

• Websites or Giving Apps
• Donor brochures
• Annual Giving reports
• Acknowledgments of donations
• Offering envelopes
• Church bulletins

Typically, disclosure statements tell donors where they can obtain more information about your ministry. For instance, Maine requires charitable organizations to disclose their names and physical addresses prior to the request for contributions.

Check for exemptions

Sometimes state law specifically excludes or exempts certain nonprofits and religious organizations from registration requirements. The exemptions vary from state to state, so it is important to consult with a local attorney.

Additional Resources

• Charitable Solicitation: Register Before Asking For Money
• IRS: Charitable Solicitation – Initial State Registration

Plan accordingly

Careful planning can help keep your ministry on the right side of the law. Here are a few measures to consider before starting your next fundraising campaign:

• Know your audience. Evaluate the recipient list for your fundraising efforts, and make a list of the states in which you plan to solicit funds. You’ll need to be sure you’re following each state’s rules before you begin sending materials.
• Stay up to date on state requirements using this interactive map.
• Be aware of recurring requirements. Some states require annual renewals of registration, reports, or filings, and may have recurring fees.
   

Ultimately, it’s best to contact a locally licensed attorney to be sure your organization is in compliance with all applicable fundraising requirements. In addition, larger ministries, schools, and universities with a multistate fundraising footprint may find it worthwhile to partner with a company that specializes in nonprofit compliance.

Following the law helps you steer clear of stiff consequences such as fines, negative publicity, and even the loss of nonprofit status. Complying with registration requirements also can build trust with your donors, as it demonstrates your dedication to transparency.

More Resources

• Creative Income Sources – Brotherhood Mutual Safety Library Article
• Charitable Solicitation Registration - National Council of Nonprofit
• Fundraising Guidelines for Charities - IRS Webinar
• Publication 3079 – Tax Exempt Orgs and Gaming

The information provided in this article is intended to be helpful, but it does not constitute legal advice and is not a substitute for the advice from a licensed attorney in your area. We strongly encourage you to regularly consult with a local attorney as part of your risk management program.

Posted September 2021