Nonprofit fundraising serves as a vital lifeline for organizations dedicated to public good, but it must be approached with careful attention to legal compliance and ethical standards. In California, charitable solicitation is heavily regulated to protect both donors and the integrity of the nonprofit sector. Leaders and fundraisers must understand the legal framework they operate within and take active steps to promote transparency, honesty, and respect in all fundraising communications.
To start, any nonprofit soliciting donations or holding charitable assets in California must register and remain in good standing with the California Attorney General’s Registry of Charities and Fundraisers. This applies not only to organizations physically located in California but also to out-of-state organizations soliciting from California residents or doing business in California, including through mail and online activity. The Attorney General monitors compliance and may publicly list a nonprofit’s delinquent status, impose penalties, and revoke a charity’s ability to solicit funds if rules are not followed, such as fundraising while unregistered, delinquent, suspended, or revoked. In addition, nonprofits must file initial registration forms (Form CT-1) and annual reports (Form RRF-1), ensure their tax-exempt status is current with both the IRS and Franchise Tax Board, and maintain their corporation in good standing with the Secretary of State.
Ethically, fundraising should be grounded in truthfulness and respect for the donor. This means being transparent about how funds will be used, avoiding pressure tactics, and respecting donor intent. Nonprofits should be careful not to overstate tax-deductibility if contributions come with membership perks, event benefits, or other quid-pro-quo elements, and for contributions of $250 or more, nonprofits must provide donors a contemporaneous written acknowledgement substantiating the contribution. Further, accepting a charitable contribution creates a charitable trust under California state law requiring that funds must be used only for the charitable purposes for which they were sought.
In addition to regulating charities, in California, the Supervision of Trustees and Fundraisers for Charitable Purposes Act outlines how professional fundraisers must register, disclose compensation arrangements, and avoid misleading representations.
Another crucial legal area involves the use of charitable raffle tickets and online sweepstakes. Under California law, only eligible nonprofits can conduct raffles, and only if they register in advance with the Attorney General’s Office. Importantly, at least 90% of gross raffle receipts must support the nonprofit’s charitable purpose. Violations of these rules can result in civil penalties and jeopardize an organization’s reputation.
State and federal law set important standards to ensure that fundraising is both effective and ethical. Understanding the regulatory framework, prioritizing transparency, and embracing ethical fundraising practices not only ensure nonprofits comply with the law, but also strengthens public confidence in their purposes. With compliance and integrity guiding a nonprofit’s efforts, fundraising can transform from financial necessity to sustainable growth and stability.