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New 990 Makes Nonprofit Fundraising Registration Unavoidable

Neither Legal Nor Wise to Avoid Fundraising Regulations


Oli Kellett/Taxi/Getty Images

The Back Story

Some nonprofits have been flying "under the radar" when it comes to registering to fundraise outside their home states. This is according to Gary Curtis Cannon, Attorney, and Marc Lee, CFRE, of Affinity Registration Services, a firm that handles solicitation registration for many nonprofits. In a series of webinars, Cannon and Lee are attempting to make some sense of the regulations surrounding fundraising registration. However, there is very little solid ground to stand on, it would seem.

Only one thing is sure, which is that the new IRS Form 990 has now made neglect of fundraising registration rules impossible, at least for nonprofits with incomes of more than $25,000 per year.

Those nonprofits have to file a 990 or a 990-EZ, and the new forms require information about where organizations are registered to fundraise. For example, Schedule G, Part I, Question 3 reads:

"List all states in which the organization is registered or licensed to solicit funds or has been notified it is exempt from registration or licensing."

The topic of fundraising out-of-state and where you must register is murky. A few states don't require registration at all, and there is not much uniformity state to state on the main requirements, much less on the finer details.

For instance, Lee says, "Although there is an overall exemption from registration for churches, under the header 'religious organizations,' each state defines what constitutes a religious organization differently - some broadly, some narrowly." Similarly, education and political organizations, sometimes, are exempt, depending on the state and its definitions.

Even if you raise funds only online, there is no escape from registration. Guidelines for online fundraising were adopted by the board of the National Association of State Charity Officials (NASCO) in 2001. According to those rules, any nonprofit that uses online fundraising tools to target donors in a specific state has to register in that state.

The Basics

Here is some basic information and tips about fundraising registration from Cannon and Lee's webinar. Be aware, however, that you'll need to do your homework on this issue and/or get legal advice for your particular nonprofit.

  • Register before you start fundraising.
  • Register in your home state--this is called your state of domicile.
  • Register in every state where you solicit funds. If you receive less than $250 in donations from a particular state, don't register and do not send postal mail or email to that state. It's too expensive to register where you receive little value. Several donation processing programs allow you to screen out states.
  • If you accept online donations, do register in Florida and New York state, even if you don't solicit there. Those states require registration for simply accepting a donation from the state. If you are a local or regional organization, consider donation software that will allow you to block donation online from other states.
  • Follow the rules of each state for registration, reporting, documentation, etc.
  • 38 states do accept the Unified Registration Form, but they often differ in the documentation that they require. So you can't just submit one registration to all of those states and forget it. You'll need to customize each registration with the required documents.
  • In most states that require registration, you also have to renew annually. Each state's requirements are different and deadlines for renewal vary. Fees for registration differ state to state.
  • If you do not register properly in other states before you fundraise, your organization risks penalties and even felony charges. Some donations have had to be given back as a result of not registering or registering too late. Your auditors and grantors will also require that your registrations are in order. Since the new 990 requires organizations to report where they are registered, it is impossible to ignore out-of-state fundraising registration.
  • Do not argue with the IRS or the State Attorney Generals about fundraising registration. That is usually futile.

Because the rules for registration are not uniform, and in fact are in flux, and the paperwork and staff time to keep up is so onerous, many charities contract with third parties to take care of the chore for them. Here are some companies that your organization might want to look into. All of these companies have useful information at their websites.


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