New look slides! Are you sure you know all about this often-misjudged requirement that is fast becoming one of the most common Noncompliance issues when Fundraising from America? US states are increasingly requiring registration if you fundraise in their state. If you have an office, address, staff, bank account or other ‘permanent’ activities in a state you may also be required to register in that state to do business. Each state is different in what it considers fundraising – in some merely having a website is enough. We will highlight what this could mean for your 501(c)(3) organisation – what constitutes fundraising or operating a state, what registration is required and when you should do so and how much it will cost you either to register or in penalties if you fail to do so.

1. Fundraising from America:
A Guide to
State Registrations
Presented by Chapel & York Limited

2. A Guide to State Registration
Are you sure you know all about this
often-misjudged requirement that is fast
becoming one of the most common
Noncompliance issues when Fundraising
from America?!

3. Today we will be covering…
A Guide to State Registration
- State Registration - Why Now?
- State Exemptions.
- States you do not need to worry about.
- The Charitable Solicitation Act.
- States you should consider registering in.
- Penalties.
- Online solicitation – The Charleston Principles.
- How to Register.
- Annual State Renewals.
- Professional Solicitors / Fundraisers / Counsel.
- How to decide which state your non-profit should register in.

4. A Guide to State Registration
When you first setup your non-profit in the US you incorporated your
organisation in one of the fifty states or the District of Columbia. Then you
applied to the IRS for exemption from federal income tax. This exemption
however only proves your organisation is exempt from federal income tax in all
states and DC. It does not cover exemption from state registration, only the
state you are actually incorporated in.
Typically in the past only large non-profits would be able to fund state-wide
fundraising and smaller non-profits would fundraise locally in their own state.
Thus, it was only the larger non-profits that had to worry about registering
outside their one state. Small non-profits usually never had to deal with the
expensive and time-consuming burden of multistate registration.
So let us go back to the beginning…

5. A Guide to State Registration
Today, however, even the smallest non-profit can reach a nationwide
audience through an website or email, and collect contributions from
donors location anywhere in the country. Consequently, many small
non-profits that have never had to deal with registration other than in
their home state must now figure out where and how to register in
multiple states.
So let us go back to the beginning…

6. A Guide to State Registration
Nevertheless, until recently all but the largest non-profits that solicited
contributions nationwide tended to ignore state registration requirements.
As many as 90% of all non-profits failed to register in one or
more states even though they were required to do so by law.
Typically nothing happened because most states lacked the manpower and
desire to enforce their registration laws. However this is changing. It is
imperative for all non-profits to comply with state registration laws. If you don’t
you run the risk of unwanted attention and scrutiny from the IRS and states,
and potential problems with donors.
Why Now ?

7. A Guide to State Registration
Tax Returns Makes Nonprofit Fundraising Registration
Unavoidable
Due to IRS expanding on reporting requirements for the annual tax return
(Form 990) among other things the Form 990 now requires numerous
disclosures about compliance with state non-profit laws, including those
concerning non-profit fundraising registration.
State filing fees good source of income
With shrinking state budgets, state registration fees and late filing fines are a
now potentially lucrative source of income. States can find out by reviewing
the Form 990 or a donor could even enquire to the state which
can be a tip off to a state.
Why Now ?

8. A Guide to State Registration
All states exempt certain types of non-profits from registration. These usually
include educational institutions, hospitals, religious entities and organisations
with limited income. However the definitions for each of these differ from state
to state, so where one organisation is exempt in one state they may not fall
within another state’s definition of exemption.
28 states grant exemptions to non-profits that have income of less than a
specified amount. In 16 states the threshold is $25,000 which means total
income for the year across the whole of the US. However in New York you
only count contributions from New York state residents and government
grants. Michigan grant exemptions to non-profits that receive contributions
from 10 or fewer people during the year.
State Exemptions

9. A Guide to State Registration
28 states grant exemptions to non-
profits that have income less than a
specified amount.
State Exemptions

10. A Guide to State Registration
Arizona, Delaware,
Idaho, Indiana, Iowa,
Montana, Nebraska,
South Dakota, Texas
(requires only public
safety, law
enforcement and
veterans’
organisations to
register), Vermont &
Wyoming.
States you don’t need to worry about

11. A Guide to State Registration
What type of solicitation trigger registration requirements?
Basically the state rule is that any non-profit that makes or intends to make, a
charitable solicitation within a state that requires registration must register
with that state. Charitable Solicitation is defined broadly to include any
request for a contribution by a non-profit in which:
- An appeal is made for a charitable purpose.
- The name of a charitable organisation is used or a statement is made that
implies that all or part of the donation will be applied to a charitable
purpose or donated to a charitable organisation.
Remember the registration requirement is trigged by asking for donations – it
is not necessary that your non-profit actually receives a donation.
This means that should register in any state before you actually solicit
there (except California which requires registration within 30 days of
receiving a donation)
The charitable solicitation act

12. A Guide to State Registration
40 states plus the
District of Columbia
have opted for what is
known as “the
charitable solicitation
act” and require non-
profits that solicit
donations in their
jurisdiction to register
with the state agency.
The charitable solicitation act

13. A Guide to State Registration
As almost half the
population of the
United States resides
in just ten states that
require registration.
These are:
California, New York,
Florida, Illinois,
Pennsylvania, Ohio,
Michigan, Georgia,
North Carolina and
New Jersey.
Where is it worthwhile to register ?

14. A Guide to State Registration
If you don't register in a state where you are required to, you are breaking that
state's law. States may impose fines and other penalties on non-profits that fail to
register. These fines can be substantial. For example, Pennsylvania imposes a
minimum $1,000 fine for failing to register. the state may order your non-profit to
cease soliciting donations within the state until you register there. Some
donations have had to be given back as a result of not registering or registering
too late.
The Board of directors in some states can be held personably liable for not
registering in a state. If you have already solicited donations in one or more
states where you should have registered, you should go ahead and register
where you need to.
Some states establish periodic amnesties in which non-profits
are allowed to register late without any penalties applying.
Penalties

15. A Guide to State
The National Association of State Charity
Officials (NASCO) has issued detailed
guidelines on when the existence of a
website alone should give rise to an
obligation to register with a state. These
guidelines are called the Charleston
Principles. Under these guidelines,
registration in a state is required only if:
- the non-profit's website is used to make
charitable solicitations, and
- the non-profit has sufficient fundraising
contacts with state residents, whether through
the website or by other means.
Online solicitation –
The Charleston Principles

16. A Guide to State Registration
Interactive website
An interactive Web site is a Web site that permits a contributor to make a
contribution, or purchase a product in connection with a charitable solicitation, by
electronically completing the transaction, such as by submitting credit card
information or authorizing an electronic funds transfer.
General Exclusions
Maintaining or operating a Web site that does not contain a solicitation of
contributions but merely provides program services via the Internet—does not,
by itself, invoke a registration requirement. For example some non-profits list a
contact email for a donation form. Because the form is emailed and then
completed manually it is not deemed “interactive” .
Online solicitation – The Charleston Principles

17. A Guide to State Registration
It is important to remember that these guidelines are not legally binding on any
state. Nevertheless, with some important exceptions below, most states follow
the Charleston Principles. Colorado and Tennessee - have incorporated the
principles directly into their charitable solicitations law. New York and New Jersey
however do not follow the Charleston Principles.
Each state also seems to have a separate body of case law interpreting whether
a “donate here” button or online campaign is enough of a “nexus” or “presence”
within a particular state to trigger that state’s registration requirements.
If you accept online donations, do register in Florida, New York, Pennyslvania
and New Jersey state, even if you don't solicit there. Those states require
registration for simply accepting a donation from the state.
Online solicitation – The Charleston Principles

18. A Guide to State Registration
Registration involves filing an application with the appropriate state agency and,
in most states, paying a registration fee. You'll usually have to provide financial
information with your application. Often, this can be a copy of your most recent
Form 990 (Tax Return). Registration usually consists of two parts: an initial
registration application and an annual renewal. There is a Unified Registration
Statement (URS) a form which can be filed with most states, however the form
has to be notarised which is an additional cost for the non-profit. If using the URS
often states require supplemental forms and of course the financial information.
Therefore most nonprofits tend to use the state designated registration form and
file it with a copy of the Form 990.
How to Register

19. A Guide to State Registration
Certain states require a Registered agent to be appointed in their state. A
registered agent can be an individual or a company residing in that state. A
registered agent is required for what is known as service of process. Basically it
is someone that would accept important documents on behalf of your
organisation in that state. You have a registered agent in your state of
incorporation and if required Chapel & York can assist with a firm for other states.
Some states require a Certificate of good standing, you can obtain one from your
state of incorporation for around $50, this as proof you are current and compliant
with that state.
How to Register

20. A Guide to State Registration
In all states annual financial reports are required in hand with registration
renewals. The financial report contains detailed financial information on the
organisation including balance sheet, statement of support, expenses and a
breakdown statement of functional expenses. In most states a copy of the IRS
Form 990 will suffice however in certain states audited financial statements are
required and this is an additional cost to the non-profit organisation. Audits costs
can be between $3,000 to $6,000 whereas accountants reviews can be around
$2,000. State filing deadlines differ for all the states and extension of time to file
renewals and annual reports are permitted in pretty much all states.
13 states require disclosure notices to be displayed on all solicitation material.
The disclosure notice notifies donors that information on the organisation can be
obtained from the state concerned or from the organisations website.
Annual State Renewals

21. A Guide to State Registration
A Professional fundraiser is any outside professional person or company hired by
a non-profit to help with fundraising. They are not employees of the non-profit.
Professional solicitors are people paid by the non-profit to directly solicit
contributions from the public, through door to door soliciting, event marketing or
any other type of direct solicitations.
Fundraising consultants are also known as fundraising counsel and they help
non-profits plan or manage a fundraising campaign. Direct marketing firms often
fall into this category. An outside grant writer hired as an independent contractor
to help write a grant request would also be fundraising consultant.
If any of the above are going to be engaged, check that they are
already registered in the state as it is a state requirement that
they register themselves and you declare them on
your annual financial information such
as Annual state reports.
Professional Solicitors / Fundraisers / Counsel

22. A Guide to State Registration
Unless you receive at least $250 in total state donations each year it makes no
sense to register because of the cost of registration will exceed the value of
donations, however remember certain states require registration for merely
asking for contributions that trigger state registration.
Basically the rule is that any non-profit that makes or intends to make, a
charitable solicitation within a state that requires registration must register with
that state.
Worthwhile looking at the states where existing donors are located.
To Register or not to Register ?

23. A summary of today’s webinar:
Here is some basic information and tips about
fundraising registration. Be aware, however, that
you'll need to do your homework on this issue and/or get
legal advice for your particular non-profit.
- Register before you start fundraising.
- Register in every state where you solicit funds. If you receive less than $250 in donations
from a particular state, don't register and do not send postal mail or email to that state
- 38 states do accept the Unified Registration Form, but they often differ in the
documentation that they require. So you can't just submit one registration to all of those
states and forget it. You'll need to customize each registration with the required
documents.
- In most states that require registration, you also have to renew annually. Each state's
requirements are different and deadlines for renewal vary. Fees for registration differ state
to state.
- If you do not register properly in other states before you fundraise, your organization risks
penalties and even felony charges. Some donations have had to be given back as a result
of not registering or registering too late.
All information supplied can be subject to change as the states often
update their sites on a yearly basis.
A Guide to State Registration

24. This information was not intended to be legal advice.
It is advised that you consult your own legal expert in regard to your specific situation.
that’s it!
for listening.