Most states and even some localities require nonprofits to register or obtain permits for the privilege of asking their residents for donations. This type of fundraising activity is called “charitable solicitations” and is heavily regulated to prevent fraud and harassment of the public.
While it varies by state, county, and city, any activity that invites someone to make a gift to support a nonprofit, such as a letter, email, or phone call, is considered a charitable solicitation. Fundraising events are always included within the definition of charitable solicitation. In many states, grant writing is also considered charitable solicitation.
At the local level, some cities only require a solicitation permit for individuals who go door-to-door to solicit donations or who solicit in public spaces or on city roads or sidewalks. Other cities require a permit for any type of fundraising event or activity held within the city. When in doubt, it’s best to call a city’s business services department to clarify what, if any, registration is needed.
What Does My Nonprofit Need to Do to Start Fundraising?
Typically, a nonprofit must apply for a charitable solicitations permit before it starts soliciting donations in a particular state, county, or city. However, in some states and localities, registration is only required within a certain number of days of receipt of funds.
A nonprofit must generally register in every state or locale in which it solicits donations if that state or locale requires registration. Eleven states have no or minimal registration requirements: Arizona (except for solicitation on behalf of veterans’ organizations), Delaware, Idaho, Indiana, Iowa, Montana, Nebraska, South Dakota, Texas (except for solicitation on behalf of public safety personnel or veterans’ organizations), Vermont, and Wyoming.
Note that not all types of nonprofits need to register. There are a variety of exemptions available in many states and local jurisdictions for certain organizations such as churches, other faith-based organizations, schools, and hospitals. Check with your state or local charity regulator to determine if your organization is required to register.
What about Online Fundraising and Special Events?
Online fundraising activities may trigger registration requirements in multiple jurisdictions or even nationwide. If your nonprofit will be engaging in any fundraising activities outside its home jurisdiction, including via its website or social media, it should seek legal counsel regarding additional registrations that may be required.
Another type of fundraising activity that may require additional permitting is a fundraising event. At the local level, many cities (or counties, in the case of unincorporated areas) require organizations to apply for a permit at least 15 days prior to the solicitation start date or event. The specific timeline will usually be outlined in the instructions that accompany the permit application.
Many states and localities also have additional registration obligations for professional fundraisers (and the nonprofits who hire them) as well as fundraising activities that include gambling such as bingo, sweepstakes, raffles, and casino nights.
Do I Need to Register My Nonprofit in California to Begin Charitable Solicitations?
Most nonprofits incorporated or operating in California must register and file annual registration renewals with the California Attorney General’s Registry of Charitable Trusts (RCT). There are exceptions for certain types of organizations including religious nonprofits and nonprofit mutual benefit corporations that do not hold any charitable assets.
Newly established nonprofits, and those new to operating in California, must register with the Registry of Charitable Trusts by filing form CT-1 within 30 days of first receiving charitable assets. Assets include donations, real or personal property, government grants, and any other contribution of value.
Each year thereafter, nonprofits must file an annual renewal form, RRF-1. Details regarding the RRF-1 and additional forms that nonprofits may need to file along with form RRF-1, depending on each nonprofit’s particular circumstances, can be found on the California RCT webpage here.
In addition to the RCT registration and renewal requirements discussed above, nonprofits that plan to conduct raffles or gaming activities may have to file additional registrations and reports with the RCT. Additionally, information about California’s requirements for professional fundraisers is available here.
For additional information and best practices for nonprofits incorporated or operating in California, see the California Attorney General’s Guide for Charities.
Penalties for Not Registering
Nonprofits may be subject to fines at both the state and local level for failure to register and obtain any necessary fundraising permits. In some local jurisdictions, failure do to so could also result in the cancellation of a fundraising event. At the state level, it may also result in suspension of the nonprofit’s right to do business in the state, including the right to solicit donations and expend charitable assets.
In California, if a nonprofit fails to complete the initial charitable solicitations registration requirements, the California Attorney General may suspend the organization’s right to engage in activities in California that require registration (e.g., raising and spending charitable funds) and, if the registration remains uncured, assess penalties and/or bring an administrative or legal action against the nonprofit. Further, if a nonprofit is suspended with the California Attorney General, it may lose its tax-exempt status with the California Franchise Tax Board.
If a nonprofit fails to timely file the required annual renewal forms, the RCT will list that nonprofit’s status as “Delinquent” on the Attorney General’s Registry of Charitable Trustswebsite. If a delinquency remains uncured, the nonprofit may face similar consequences to onethat has failure to register, including penalties, administrative or legal action, and the loss of tax-exempt status with the Franchise Tax Board.
Most states, including California, and other local jurisdictions carefully oversee charitable solicitation activities to ensure that nonprofits comply with applicable laws. Accordingly, nonprofits must be proactive to ensure they are on top of all the required fundraising registrations and permit applications covering their activities. The Law Firm for Non-Profits is here to help you navigate the requirements applicable to your organization to begin your charitable solicitations