Frequently Asked Questions
Who needs to register for charitable solicitation?
All nonprofits have some requirement to register in states prior to beginning any solicitation campaign, not just 501(c)(3) exempt organizations. 501(c)(4) organizations and 501(c)(19) organizations (veterans organizations) also have certain registration requirements. Higher educational institutions, religious organizations, hospitals, foundations, and member organizations may qualify for certain exemptions but are still required to register for these exemptions and make their presence known before asking for donations.
Where do I need to register?
There is a common misconception among nonprofits in that they only need to register in a state if they collected over a certain amount of money from residents in that state. The state regulations require that a nonprofit organization obtain a solicitation license prior to soliciting, which means you need to have a license to ask not only residents but also corporations, regardless of how much money you actually receive. Any kind of direct mail, phone solicitation, event, raffle, or even directing people to your website to make donations is considered active soliciting so it is important that you know what the regulations are in the states where your donors are being contacted.
What is required in order to obtain a solicitation license?
Most commonly a state will require copies of all of an organization’s founding documents (Articles of Incorporation, IRS Determination letter, and Bylaws) a copy of the most recently filed IRS Form 990 and corresponding audited financial statements, and a registration form (each state has a different form) for initial registration. To renew each year after they will require a renewal form and the organization’s IRS Form 990 and audit for each fiscal year moving forward. Registration fees and any applicable late fees also differ with each state. If the organization has any contracts in place with a fundraising consultant, professional solicitor, or commercial co-venturer these contracts will also need to be submitted with the registration forms.
What are the fees for registration?
Each state has a different fee for initial registration and for renewal registration. Some states have set fees while others have sliding fees of up to $2,000 depending on the amount of gross revenue or gross contributions received during the previous fiscal year. In addition to the registration fees some states have late fees that apply if a due date is missed. These late fees may be flat or may accrue monthly depending on the state. Feel free to contact us if you need specific state fee information.
What are the penalties for not being registered?
Each state has its own penalties for soliciting without a current license. These penalties can vary depending on how many solicitations were made, the length of time that the organization was out of compliance, or even how much money the organization received from the solicitations they made. Penalties may include fines of anywhere from $500 to $50,000, the suspension or revocation of a license, imposing a voluntary compliance agreement, or even requiring that the donations be returned to the donors.
Are there any exemptions available for certain types of nonprofits?
There are some nonprofit organizations such as accredited educational institutions, hospitals, religious organizations, member organizations, etc. that can qualify for exemption from registration in many of the states. However there still may be requirements to file for these exemptions and some exemptions may have to be renewed annually.
What if my organization is registered in a state that we no longer solicit in?
Sometimes an organization may decide to scale back on its fundraising across the nation and focus more on the states where the support is coming from. In this case it is very important not to just “let the registration go” in those states where you no longer solicit. Steps need to be taken in order to properly withdraw or close your registration so that the state regulators know that you are no longer soliciting there. Some states may only require a letter from the organization but others will require a final filing or specific withdrawal form to be submitted. If no action is taken and the organization’s registration expires, late fees may start to accrue. The registration will have to be brought up to date and all fees will have to be paid before the organization can withdraw.
What is the difference between a Fundraising Counsel, Professional Solicitor, and a CCV?
The states tend to define these differently as well but as a general rule these fundraising professionals are categorized as follows:
A Fundraising Counsel is a person or group that plans, manages, and advises in fundraising activities for a contracted amount of compensation. This may be a party that counsels the organization’s staff on how to conduct a direct mail campaign, and online campaign, or any other type of fundraising event but does not actually participate in contacting potential donors.
A Professional Solicitor is a person or group who, for a contracted amount of compensation, actually makes the solicitations on your organization’s behalf. In most cases this would be telemarketing or door-to-door services where the solicitor is specifically contacting donors and asking for contributions.
A Commercial Co-Venturer (CCV) is an organization that runs a campaign to benefit your nonprofit by agreeing (in the form of a contract) to donate a portion of its proceeds from the sale of a product or a service for any designated length of time.
Charity Compliance Solutions can help you distinguish the difference between these groups and can also make sure that they are properly registered with the states to be conducting these fundraising campaigns on your behalf.