Charitable Gift Annuity Compliance

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Establish a Legacy of Compliance in Your Organization

Charitable gift annuities can be mutually beneficial for donors and the organizations that issue the annuity. In a charitable annuity contract, a donor makes a lump-sum donation in return for tax benefits and a stream of income that lasts for the life of the donor. Charities receive all remaining funds after performance of the contract. This powerful fundraising tool allows charities to secure sizeable donations and provides donors with an opportunity to support their favorite charity.

Due to the complex financial nature of these agreements, states tend to place significant regulations on the issuance of charitable annuities. Depending on the home state of the organization and the location of donors, a variety of regulations and requirements could apply.

If your organization uses charitable gift annuities, then let our full-service licensing compliance service help. We prepare your registrations, track renewals, provide disclosure statements, and can also equip your organization with other fundraising registrations.

Overview of Requirements

Almost every state allows charities to use charitable gift annuities as a method of fundraising. Charitable organizations that use gift annuities as a fundraising instrument are typically regulated by the department of insurance, and charities with donors in more than one state may need to register with the department of insurance in multiple states.

Charitable gift annuity requirements vary by state, but common prerequisites include:

  • 501(c)(3) status
  • Disclosure statements on annuity contracts
  • Organization age requirement
  • Financial asset requirements
  • Submission of audited financial statements
  • Creation of a separate reserve account
  • Submission of sample annuity agreements

State Requirements

Depending on the state, organizations that issue charitable gift annuities may need to apply for a license, notify the state, or simply comply with state regulations. States can be grouped into the following four categories:

Registration Required

Alabama, Arkansas, California, Florida, Hawaii, Maryland, Montana, New Hampshire, New Jersey, New York, North Dakota, Oklahoma, Tennessee, Washington

A license or registration is required before a charity can issue charitable gift annuities in the 14 states listed above. Requirements vary by state, but in most cases charities will need to submit an application, fee, and additional information to the department of insurance. In addition to meeting licensing requirements, charities in these states must follow all relevant state regulations.

Notification Required

Alaska, Connecticut, Georgia, Idaho, Iowa, Mississippi, Missouri, Nevada, New Mexico, North Carolina, Texas, West Virginia

Notification states require charities to submit a statement acknowledging their desire to issue charitable gift annuities. The majority of states require notification on the first day an organization enters into a charitable annuity agreement, but several states allow notification as late as 90 days after the issuance of the first annuity. In addition to notification, charities in these states must meet prerequisites and follow department of insurance regulations related to charitable gift annuities.

Regulated Without Notification

Arizona, Colorado, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Massachusetts, Minnesota, Nebraska, Oregon, Pennsylvania, South Carolina, South Dakota, Utah, Vermont, Virginia, Wisconsin

Charities in the 19 states listed above do not typically need to register with or notify the department of insurance before issuing gift annuities. Although there is no registration requirement in these states, charitable organizations must meet all prerequisites before issuing annuities and must continue to follow regulations during the fundraising process.

No Statutory Provisions

Delaware, District of Columbia, Michigan, Ohio, Rhode Island, Wyoming

The remaining six jurisdictions do not have statutes that specifically address charitable gift annuities. Charities will likely be allowed to issue annuities in these jurisdictions, but there may be prerequisites to meet beforehand. It is recommended that charities seek additional guidance prior to issuing an annuity in one of these jurisdictions.

Maintaining Compliance

After meeting all initial filing requirements, charities must continue to follow the guidelines set by the state. States that register charities generally require submission of annual renewal filings, while charities in other states are not typically required to submit ongoing filings.

Although the majority of states do not have a formal renewal process, charities may be required to submit updates to organization information and periodic financial statements. In addition, charitable organizations must maintain the required minimum balance of cash or cash equivalents if the state requires this.