registration and reporting

© 2012 - 2021 Harbor Compliance

Charitable SolicitationRegistration and Reporting

Presented by:Sharon Cody, J.D.

© 2012 - 2021 Harbor Compliance© 2012 - 2021 Harbor Compliance

Your presenterLabyrinth, Inc. and Harbor Compliance Harbor Compliance and Labyrinth Inc. provide services and software to help nonprofits manage compliance, including nationwide charitable solicitation registration and reporting.

Sharon Cody, JDPartnership Manager

717-431-9162 (direct)[email protected]

Harbor Compliances is not an accounting or legal firm and does not provide tax, financial, or legal advice.


#1 - State fundraising registration, reporting and disclosure requirements

#2 - Fundraising activities that trigger registration requirements

#3 - Financial statement requirements for nonprofits

#4 - Online fundraising compliance

#5 - Prioritizing and planning for fundraising compliance

What Will We Cover?



Charitable Solicitation Compliance

From the Internal Revenue Service

Many states have laws regulating the solicitation of

funds for charitable purposes. These statutes generally

require organizations to register with a state agency

before soliciting the state's residents for contributions,

providing exemptions from registration for certain

categories of organizations. In addition, organizations

may be required to file periodic financial reports. State

laws may impose additional requirements on

fundraising activity involving paid solicitors and

fundraising counsel.

“


State Charitable Solicitation Requirements

41 Require charitable solicitation registration

25 Require a disclosurestatement

State RequirementsCharitable solicitation registration and disclosure statement

Charitable solicitation registration

Disclosure statement


● State-specific application detailing charitable programs, and solicitation activity

● Copies of organizational records, such as formation documents and IRS exemption determination

● Current list of officers, directors, and key executives

● Contracts with professional fundraisers, fundraising counsel, and commercial co-ventures

● Form 990 and all schedules

● Financial statements, either audited, reviewed, or compiled depending on the state

● In some states, proof of foreign qualification and appointment of a registered agent for service of

process.

● Annual filing fee, usually based on annual contributions or gross revenue

While the registration process varies by state, nonprofits may expect to submit the following on an annual basis:


Charitable Solicitation Reporting

California

Colorado

Hawaii

Illinois

These states generally have reporting deadlines that fall on the same day as the IRS due date for Form 990. Some may include automatic extensions in their deadlines. Others require the filing of manual extensions.

Kentucky

Maryland

Massachusetts

Minnesota

New Hampshire

New York

Ohio

Oregon

Pennsylvania

South Carolina

Virginia


Donors are eager to support good causes, but they also need assurance

that a charity is legitimate before giving. Charitable solicitation

disclosures help build trust and earn more dollars for your mission.

Each state’s requirements are different. But, disclosures are typically

included on:

● Written solicitations

● Donor confirmations

● Donor receipts

● Reminders of contributions

Our services help nonprofits stay on top of fundraising disclosures in

every state in which they’re required.

Example of a Disclosure Statement for Pennsylvania:

10 Pennsylvania Statutes § 162.13 (c)

“ “(c) Notice on Printed Solicitation

On every printed solicitation or written confirmation,

receipt and reminder of a contribution, the following

statement must be conspicuously printed verbatim:

The official registration and financial information of

(insert the legal name of the charity as registered

with the department) may be obtained from the

Pennsylvania Department of State by calling toll free,

within Pennsylvania, 1 (800) 732-0999. Registration

does not imply endorsement.

Charitable Solicitation Disclosures


Solicitation = asking for donationsTraditional forms of solicitation:

● Direct mail

● Phone calls

● Personal visits

● In person events

● Applying for grants

Regulated Activities



Solicitation Also Includes:

● Applying for foundation grants

● Collecting membership dues

● Participating in Giving Days

Other forms of fundraising solicitation:

● Professional fundraisers

● Fundraising counsel

● Cause marketing/commercial co-ventures

Special requirements may apply to:


State thresholds for audited or reviewed statements are typically based on:

● Total contributions, gifts, and grants (Form 990, Part VIII, Line 1h). Occasionally, government grants in Line 1e are excluded from this total.

● Gross revenue (Form 990, Part VIII, Line 12).

● Occasionally, program service revenue (Form 990, Part VIII, Line 2g) is considered in addition to annual contributions.

https://www.harborcompliance.com/information/charitable-registration-audit-requirements

https://www.google.com/url?q=https://www.harborcompliance.com/information/charitable-registration-audit-requirements&sa=D&ust=1590696854491000&usg=AFQjCNH_dxqfY1Phjgj7S4cLKymRcULJbw


State thresholds are generally NOT based on:● The number of transactions in a particular year (such as a small number of large

contributors or a large amount of startup funding).

● Income from a particular state.


Tip:Nonprofits and practitioners must both understand the impact charitable solicitation registration has on the type of financial statements needed.



State criteria for granting a waiver, if they exist at all, are highly conditional. For example:

● Illinois permits a “once-in-a-lifetime” waiver, which means an organization may request a waiver one time, but may not ever again.

● Pennsylvania requires a presentation of “special facts and circumstances,” which may not include ignorance of the requirements or the expense of a CPA engagement.

● Wisconsin offers a waiver only to organizations that see large year-over-year growth.

Tip:In general, nonprofits and their CPAs, need to plan ahead to successfully meet statutory financial statement requirements before submitting charitable solicitation registration materials.

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Planning to Ensure Proper Financial Statements

● In what states is the nonprofit organization required to register to solicit?

● What are the thresholds for reviewed or audited financial statements in each of those states?

● What was the nonprofit’s income (both from contributions and gross revenue) for the most recently completed tax year?

● What type of financial statements will allow the nonprofit to meet those requirements in all states?

● What type of financial statements will be needed next year based on the nonprofit’s planned growth in operations and revenue?


Online Fundraising Solicitation

Ways to solicit online:

“Donate Now” buttons

Email

Social media


Two Practical Approaches to Online Fundraising

1 Register or file an exemption in all 41 states. 2 Don’t accept online contributions from

states in which you’re not registered.

OR


● Review your fundraising solicitation in each of the 41 states

● Compliance may mean filing registrations or exemptions in multiple states

Where are you soliciting?

Where Do We Need to Register?



Why Compliance Should Be a Priority

Most-Common Enforcement Areas by State Charity Regulators

Source: “State Regulation and Enforcement in the Charitable Sector,” Urban Institute and Columbia Law School, September 2016. Web.

● Fundraising abuses

● Trust enforcement

● Governance


State fines and penalties

Bad PR and damage to reputation

Loss of state recognition of tax exemption

Revocation of right to solicit

Enforcement actions and audits

Liability for officers and directors

Missed grant and donation opportunities

Risks and Consequences of Failing to Register


Proactive Registration Avoids Penalties

Corresponding with nonprofits is the

most-common response to violations,

followed by settlements and informal

resolutions.

State Responses to Registration Gaps



Supporters Are Researching Before Donating

“Before Giving to a Charity . . .

Find out if the charity or fundraiser

must be registered in your state by

contacting the National Association

of State Charity Officials.”

From the Federal Trade Commission Website:


92%of regulators indicated that they regularly conduct internet research on nonprofits.


Regulators Are Researching Online, Too



Communicateto your leadership teams why compliance should be a priority.

Compliance Is a Nonprofit Best Practice



Our Managed Compliance Solution

Fully manage each step of the process

Tracking software for reporting

Flat-rate pricing per state

Expert team with a dedicated Client Success Manager

Take Action!Reach out to us to discuss how we can partner with your organization!


Our Compliance Software Makes It Easy



● Provides accurate disclosure statements

for your website and printed solicitations

● Dynamically updates in real-time as there

are changes to requirements or

registration data

● Creates alerts for any issues with

registrations that impact the disclosures

Dynamic Disclosures ToolMaintain your required disclosure statements.


Partner With Harbor Compliance

Nationwide registered agent service

Specialized access permissions for CPAs and attorneys

Nonprofit and corporate lifecycle and industry licensing services

Content, referral, and custom partnerships

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