According to the IRS, approximately 40 states have enacted statutes that require nonprofit state solicitation registration before residents can be solicited for contributions—with some exceptions that may be exempt such as schools, hospitals, and religious organizations. Requirements can vary from state to state, but all charitable organizations should be familiar with regulations in a state before beginning or expanding a local solicitation campaign.
Nonprofit State Solicitation Registration
Regional or national level organizations—and those organizations in rapid growth mode—face an onerous process when determining nexus for solicitation purposes. As a result, some large organizations find it more efficient to register in all states. However, before registering, consider the logistical considerations, as well as the potential indirect costs associated with setting up campaigns in new states. For example, many states require an audit or review of the organization’s financial statements as a part of the registration process with the exact requirements often depending upon the size of the organization and the type of activities it is conducting in the state.
Additionally, the continued growth of web-based fundraising raises other considerations about whether organizations should be registered with particular states. While most laws are not written to clearly address this issue, many states and charity oversight organizations will consider online solicitations to be a nexus for requiring state registration. If your organization has a “click here to contribute” option on your website, then you may need to explore registration in states beyond your local office. Additionally, there may be issues to consider regarding state registrations when using professional fundraising consultants or solicitors.
Avoiding Nonprofit State Solicitation Registration Roadblocks
Failure to comply with state registration requirements can expose the organization to fines, revocation of solicitation privileges, and even possible civil and criminal charges. The IRS can also get involved as Form 990 filing asks specific questions about the organization’s compliance with state laws. Additionally, board members may be subject to liability due to their fiduciary responsibilities to the organization.
If your organization has questions or believes it may have potential nonprofit state solicitation registration issues, then please contact CRI’s team who can help you reach compliance with nonprofit state solicitation registration requirements.