Some 40 states require registration by non-profit organizations prior to soliciting funds within their state. Much of the relevant legislation was written before the expanded role of the internet in fundraising. States continue to adjust their requirements with significant penalties for failing to comply. With 40 different sets of regulations confusion is inevitable. Here are a few common misconceptions:
Minimum Receipt Thresholds . Many states provide an exemption for organizations which raise less than $25,000.. It’s important to note that this threshold is based on the total receipts of the organization, not just the amount raised in a given state.
Solicitation Online Counts Online solicitation using website, social media, email and other electronic means is treated in various ways from state to state. In general each organization is required to register in each state in which it solicits donations. The internet which reaches many states may trigger registration requirements in some or all of them. Registration must be done in advance of solicitation. A careful reading of each state’s requirements in necessary to ensure compliance.
Electronic Connections Track Non-Compliance –The increasing connection of data makes it easier for state regulators to track agencies which file 990s and fail to obtain state charity registration. Non-compliance is increasingly less likely to go unnoticed.
Exemptions Must Be Requested –. Most states provide exemptions for some types of organizations, but generally these exemptions are not automatic. An agency must apply for an exemption and have it granted to have effect.
Grant Requests are Solicitations. – Grant applications are considered solicitations in most states, and the resulting grant amounts may be considered part of the income for threshold purposes.
Penalties Can Be Significant –While state registration fees are generally low, the penalties for non-compliance can be severe. If an organization’s online solicitation triggers a requirement to register, failure to comply can have significant financial consequences.
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