Online Fundraising & The Charleston Principles
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Before you publish a "donate now" button on your website, send out a national email campaign, or use social media to solicit donations... your nonprofit may first need to submit a series of state registrations.
This article provides an overview of state charitable solicitation regulations and our top five tips on complying before fundraising online. If you want assistance, we can help you with a compliance solution encompassing inital registration, renewals, and multi-state URS filing across the U.S.
Regulatory Overview: Traditional Fundraising
43 states and D.C. have charitable solicitation laws. Loosely speaking, solicitation means
donation. Most states do not have special laws for soliciting donations online, but rather
falls under the "other media" category.
Nonprofit compliance with charitable solicitation laws has a few components:
- initial registration
- annual registration
- annual financial reports (often combined with annual registration)
- disclosures to donors
- obtaining a certificate of authority (in some states)
- appointing a registered agent (in some states)
The requirements are different in every state (see the navigation to the right for each state's requirements). On top of that, the laws, forms, and procedures are changing. This is particularly true in the realm of online fundraising where the law is catching up with the blossoming ePhilanthropy market.
Regulatory Overview: Online Fundraising
When fundraising online (such as publishing a "donate now" button on your website), technically
"soliciting residents" in every state for a charitable contribution. The idea of navigating and
complying with each state's requirements is formidable, especially to smaller nonprofits.
Fortunately, in 2001 the National Association of State Charity Officials (NASCO) released the Charleston Principles as guidance to states about how to handle internet fundraising. While the trend is for states to adopt these principles, remember that these principles are guidance only not law. In some states, the law (and case law) differ significantly from the Charleston Principles.
Generally the Charleston Principles assert that registration should only be required if:
- non-internet activites alone suffice to require registration, or
the nonprofit solicits contributions through its interactive website or specifically invites
offline activity to complete a contribution, and either:
- Specifically targets persons physically located in the state, or
- Receives repeated or substantial contributions. ("Repeated" and "substantial" are left up to each state to define.)
The principles leave a lot of room for interpretation, which brings us to some practical state-specific pointers.
Top 5 Tips
As you prepare to solicit donations online:
- Always register in your state of incorporation.
- Following-up with fundraising contacts residing in unregistered states may trigger registration. For example, you receive an unsolicited and insubstantial contribution through your website from a resident of a state in which you are not registered. If you then solicit that contact via email, phone, mail, or any other medium, that will be treated as solicitation triggering registration. Email is generally treated the same as a mail or in-person solicitation.
- Soliciting through a charity portal alone such as www1.networkforgood.com does not trigger registration. That is because it is a donor-advised fund that exists to distribute funds to other nonprofits. Technically the donation is given to the fund as the payee. Scrutinize any website before assuming it is a donor-advised fund; their fine print may pass the burden of charitable registration on to you.
- Your nonprofit may consider hosting a non-interactive websites that encourage donations through third-party sites or offline means. This may still trigger registration - it is not a loophole.
- You can use social media to send out information about your nonprofit's activites without needing to register. When your language invites solicitation, you do need to register. A fan promoting donation independent of the nonprofit does not trigger registration.
We can help with all of this. Let our consultants guide you through the process of staying compliant as you grow your nonprofit.