On October 7, 2021, California Governor Gavin Newsom signed into law Assembly Bill (AB) 488, the long-awaited legislation regulating internet platforms. This law is the first of its kind to regulate online fundraising and gives the state of California critical oversight of popular, modern vehicles for charitable giving.
According to a press release from the office of California Attorney General Rob Bonta, the bill “authorizes the California Department of Justice to exercise supervision over charitable fundraising occurring on internet platforms to protect donors and charities from deceptive or misleading solicitations” (source).
This bill establishes charitable fundraising platforms and platform charities as trustees for charitable purposes subject to the Attorney General’s supervision. AB 488 defines platform charities as “certain legal entities that use the internet to provide a website, service, or other platform to persons in this state, and perform, permit, or otherwise enable certain acts of solicitation to occur” (source). Examples of platform models include certain crowdfunding and peer-to-peer websites.
The law requires platform charities to register and report annually with the California Attorney General Charitable Trust Unit. Under AB 488, platforms may only enable solicitations and/or distribute funds from donations to recipient charitable organizations that are in good standing. “Good standing” means the charity’s tax-exempt status has not been revoked by the Internal Revenue Service, or the California Franchise Tax Board, or is not prohibited from soliciting or operating in California by the Attorney General.
For more information on our charitable registration solutions, visit our website.
Platform charities will be required to get written consent from charities before soliciting on their behalf. They must also provide certain disclosures, as well as donation receipts, to donors making contributions through their platforms. Additionally, platform charities will be required to hold charitable funds in separate accounts from those used for other operating or business purposes, and to promptly distribute those funds to recipient organizations.
The bill will go into effect on January 1, 2023. Regulations will begin to be implemented by the California Attorney General’s office beginning January 1, 2022.
Harbor Compliance can assist with platform fundraising compliance, including verification of charity registration status. Use this link to sign up for email updates and learn more.