The following discussion is provided for informational purposes
only and is not intended to serve as legal advice. For advice on
how state fundraising registration requirements apply to your
organization, consult your attorney.
Question: Fundraising in all 50 states via (1) the
Internet and (2) mailed solicitations. What do we need to know? Do
we need solicitation permits in each state? What are the current
laws regarding this type of fundraising?
Currently 40 states in the United States require charitable
organizations to register when engaged in solicitations within the
state. Charitable solicitations are broadly defined, to include
almost all methods of oral, written, or online requests for
contributions. The entity does not have to be physically present in
a state to be soliciting (e.g., sending a letter or e-mail into the
state is usually enough).
Most of the charitable solicitation statutes were written prior to
the Internet age and contemplate more traditional forms of
solicitation, such as calling a person in a state, holding a
fundraising event, or sending a written request for a donation.
With the growth of prevalence of online activities, the line of
when a solicitation in a state occurred became blurred. Although
adopted into law by a few states, the "Charleston
Principles" serve as helpful guidelines for determining when
charitable solicitations on the Internet trigger charitable
registration requirements in a state.
Generally, registration is required under the Charleston
Principles in a particular state in the following scenarios: (1)
the charity specifically targets a person in a particular state,
such as sending an e-mail to a person that the sender knew or
should have known resided in a state or specifically requesting
"people in X state should donate to this cause," or (2)
the charity engages in passive solicitation (for example, uses a
"donate now" button), but receives
"substantial" or "repeated and ongoing"
contributions from residents of a particular state. Therefore, if
using a "donate now" button, or other passive Internet
solicitation, it is generally recommended under the Charleston
Principles that the organization register in states in which the
organization has a physical presence—such as where the
principal office is located, and then after the donate now button
is active, to the extent possible, the organization access whether
a substantial number of donations are being received from certain
other states.
Although the Charleston Principles provide useful guidance, we
have found that practically, once an organization uses an online
functionality for donation, it is likely that it will trigger
registration requirements in all 40 states. This is because even if
the organization receives only one donation in a state, there is
almost always some form of follow-up via e-mail or letter. The
follow-up action will be deemed to target a resident of that state
and require registration.
Therefore, large charities often find it most efficient when
increasing fundraising efforts to register in all 40 states as
opposed to having to constantly re-evaluate income received from
various states and the solicitations taking place in those states.
In addition to law firms, there are a number of third-party
companies that can perform nationwide registrations and annual
renewals on a cost-efficient basis if the organization does not
want to take on the registration in-house.
Of course, in addition to the specific state charitable
solicitation registration requirements, states also have
requirements for the charity when working with professional
fundraisers or engaging in a commercial co-venture promotion.
Charities also should consider federal tax laws and regulations,
such as those regarding quid pro quo contribution disclosures.
For more information on charitable solicitations and promotions, please see the following webinar recording (and streaming PowerPoint presentation): How Nonprofits Can Raise Money and Awareness through Promotional Campaigns without Raising Legal Risk.
This article was published in the January 2014 edition of the GuideStar newsletter.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.