State Charitable Solicitation Regulation: Negotiating the Maze - - PDF document

2014 State Charitable Solicitation Registration• Gammon & Grange, P.C. • www.GG-Law.com • 703-761-5000 • 10/31/2014• Slide 1

State Charitable Solicitation Regulation: Negotiating the Maze

2014 BMWL National Nonprofit Conference Orlando, FL October 31, 2014 Stephen H. King Gammon & Grange, P.C.

2014 State Charitable Solicitation Registration• Gammon & Grange, P.C. • www.GG-Law.com • 703-761-5000 • 10/31/2014• Slide 2

Regulation of Charitable Fundraising

• - Why?

 Prevent Fundraising Fraud  Promote Disclosure of Information for Prospective Donors  Discourage High Fundraising Costs

2014 State Charitable Solicitation Registration• Gammon & Grange, P.C. • www.GG-Law.com • 703-761-5000 • 10/31/2014• Slide 3

Current Status of Regulation

 47 states and the District of Columbia specifically

regulate charitable solicitations

 39 states (plus DC) have registration requirements

for soliciting charities

 Most states also have registration requirements for

professional fundraisers/counselors

 The maze of state-specific regulations can be a

challenge

2014 State Charitable Solicitation Registration• Gammon & Grange, P.C. • www.GG-Law.com • 703-761-5000 • 10/31/2014• Slide 4

State Authority to Regulate: Jurisdiction

 States may regulate charitable solicitation activity even if the

charity is not physically present in the state

 Commonwealth of Pennsylvania v. National Federation of the Blind

(370 A.2d 732, Pa. 1977)

 American Target Advertising, Inc. v. Francine A. Giani (199 F3d

1241, 10th Cir. 2000)

2014 State Charitable Solicitation Registration• Gammon & Grange, P.C. • www.GG-Law.com • 703-761-5000 • 10/31/2014• Slide 5

Determining State Registration Obligations

Is the Organization Soliciting in the State?

Typical definition of “solicit”: a request, either directly

• r indirectly for a contribution on the plea or

representation that the contribution will be used for charitable purposes

2014 State Charitable Solicitation Registration• Gammon & Grange, P.C. • www.GG-Law.com • 703-761-5000 • 10/31/2014• Slide 6

Determining State Registration Obligations

Is the Organization Soliciting in the State?

Includes:

 In-person requests  Telephone solicitations  Media appeal or campaign  Direct mail  Charitable sales promotions

2014 State Charitable Solicitation Registration• Gammon & Grange, P.C. • www.GG-Law.com • 703-761-5000 • 10/31/2014• Slide 7

Determining State Registration Obligations

Does a Website Solicitation Affect Registration Obligations?

 “Charleston Principles” adopted as advisory

guidance by state regulators

 Register if (1) specifically target persons physically

located in a state for solicitation, or (2) receive contributions from a state on a repeated and

• ngoing basis.

 Charleston Principles found at:

http://www.nasconet.org/wp- content/uploads/2011/05/Charleston-Principles-Final.pdf

2014 State Charitable Solicitation Registration• Gammon & Grange, P.C. • www.GG-Law.com • 703-761-5000 • 10/31/2014• Slide 8

Determining State Registration Obligations

11 States That Do Not Require Charitable Solicitation Registration Arizona Iowa South Dakota Delaware Montana Texas Idaho Nebraska Vermont Indiana Nevada Wyoming

2014 State Charitable Solicitation Registration• Gammon & Grange, P.C. • www.GG-Law.com • 703-761-5000 • 10/31/2014• Slide 9

Determining State Registration Obligations

Is the Organization Exempt from Registration in Any States?

 Available exemptions from registration vary

significantly from state to state

 Typical exemptions:

 Religious Organizations  Educational Institutions

2014 State Charitable Solicitation Registration• Gammon & Grange, P.C. • www.GG-Law.com • 703-761-5000 • 10/31/2014• Slide 10

Determining State Registration Obligations

Is the Organization Exempt from Registration in Any States?

 Typical exemptions (continued):

 Libraries  Museums  Health Care Institutions  Solicitation of Members Only  Small Organizations  Solicitations for Specified Individuals  Veterans’ Organizations

2014 State Charitable Solicitation Registration• Gammon & Grange, P.C. • www.GG-Law.com • 703-761-5000 • 10/31/2014• Slide 11

Determining State Registration Obligations

Religious Organization Exemptions and Exclusions:

 Every state has a religious organization exemption

• r exclusion, but what qualifies as “religious” varies

significantly among states

 Sample definitions of religious organization:

 A person that is exempt from filing a federal annual

information return under section 6033 (a) (3) (A) (i) and (iii) and (C) (i) of the Internal Revenue Code [churches; conventions & associations of churches, integrated auxiliaries, religious orders] (Wisconsin)

2014 State Charitable Solicitation Registration• Gammon & Grange, P.C. • www.GG-Law.com • 703-761-5000 • 10/31/2014• Slide 12

Determining State Registration Obligations

Religious Organization Exemptions and Exclusions:

 Sample definitions of religious organization:

 Any corporation, trust or organization incorporated or established

for religious purposes, or established for charitable, hospital or educational purposes and engaged in effectuating one or more of such purposes, that is affiliated with, operated by or supervised or controlled by a corporation, trust or organization incorporated or established for religious purposes, or to any other religious agency or

• rganization which serves religion by the preservation of religious

rights and freedom from persecution or prejudice or by fostering religion, including the moral and ethical aspects of a particular religious faith (Kansas)

2014 State Charitable Solicitation Registration• Gammon & Grange, P.C. • www.GG-Law.com • 703-761-5000 • 10/31/2014• Slide 13

Determining State Registration Obligations

Religious Organization Exemptions and Exclusions:

 Sample definitions of religious organization:

 This article shall not apply to corporations organized under the

religious corporations law, and other religious agencies and

• rganizations, and charities, agencies, and organizations operated,

supervised, or controlled by or in connection with a religious

• rganization (New York)

2014 State Charitable Solicitation Registration• Gammon & Grange, P.C. • www.GG-Law.com • 703-761-5000 • 10/31/2014• Slide 14

Determining State Registration Obligations

Religious Organization Exemptions and Exclusions:

 Sample definitions of religious organization:

 “Religious institution” means a church, ecclesiastical or

denominational organization, or established physical place for worship in this state at which nonprofit religious services and activities are regularly conducted and carried on and includes those bona fide religious groups that do not maintain specific places of

• worship. The term also includes a separate group or corporation that

forms an integral part of a religious institution that is exempt from federal income tax under s. 501(c)(3) of the Internal Revenue Code and that is not primarily supported by funds solicited outside its own membership or congregation (Florida)

2014 State Charitable Solicitation Registration• Gammon & Grange, P.C. • www.GG-Law.com • 703-761-5000 • 10/31/2014• Slide 15

Determining State Registration Obligations

Religious Organization Exemptions and Exclusions:

 Legislative intent language in recent amendments to

Florida registration statute: “The Legislature respects the diversity of activities conducted by religious groups and therefore, through this act, intends that the definition of a ‘religious institution’ apply to bona fide religious groups.”

 www.nonprofitcpa.com/new-florida-law-tightens-

rules-charitable-solicitation/

2014 State Charitable Solicitation Registration• Gammon & Grange, P.C. • www.GG-Law.com • 703-761-5000 • 10/31/2014• Slide 16

Determining State Registration Obligations

Is the Organization Exempt from Registration in Any States?

 Determine whether a particular exemption from

charitable solicitation registration must be affirmatively claimed.

 Good summary chart (although already a bit out of

date):

www.nacua.org/nacualert/docs/CharitableSolicitation/2013 _JurisdictionalRequirementsCharitableSolicitation.pdf

2014 State Charitable Solicitation Registration• Gammon & Grange, P.C. • www.GG-Law.com • 703-761-5000 • 10/31/2014• Slide 17

The Nuts and Bolts of State Registration: Process

• Each state has its own registration forms
• The Unified Registration Statement (“URS”) is

accepted by most states, but some states only accept the URS for initial registrations

• States that do not accept the URS include Florida,

Oklahoma, and Washington

• The URS is found at http://www.multistatefiling.org/

2014 State Charitable Solicitation Registration• Gammon & Grange, P.C. • www.GG-Law.com • 703-761-5000 • 10/31/2014• Slide 18

The Nuts and Bolts of State Registration: Process

Several States Only Permit On-Line Registration:

Colorado Hawaii New Mexico Ohio

An increasing number of states are implementing an

• n-line registration option

2014 State Charitable Solicitation Registration• Gammon & Grange, P.C. • www.GG-Law.com • 703-761-5000 • 10/31/2014• Slide 19

The Nuts and Bolts of State Registration: Process

• Once registered, annual renewals are required for as long as

the organization continues to solicit in the state

• Dues dates of renewals vary by state:
• Based on fiscal year in most states
• Initial date of registration in some states
• Single due date for all organizations in some states
• Filing fees range from $0 to $2,000 per year
• MD raised filing fee October 1, 2014

2014 State Charitable Solicitation Registration• Gammon & Grange, P.C. • www.GG-Law.com • 703-761-5000 • 10/31/2014• Slide 20

The Nuts and Bolts of State Registration: Process

 Most states require the following documents with

registrations:

 Articles of Incorporation  Bylaws  IRS Exemption Determination Letter  IRS Form 990  Audited Financial Statement (if revenue threshold is

exceeded)

 Fundraising Contracts (Professional Fundraisers and

Fundraising Consultants)

2014 State Charitable Solicitation Registration• Gammon & Grange, P.C. • www.GG-Law.com • 703-761-5000 • 10/31/2014• Slide 21

What is a Professional Solicitor?

 Typically defined as any person who, for

compensation, performs for a charitable

• rganization any service in connection with which

contributions are or will be solicited in a state by the compensated person or by any person it employees, procures, or otherwise engages, directly

• r indirectly, to solicit contributions.

 Does not include: employees, attorneys, investment

counselors, or bankers who advise the organization.

2014 State Charitable Solicitation Registration• Gammon & Grange, P.C. • www.GG-Law.com • 703-761-5000 • 10/31/2014• Slide 22

What is a Professional Fundraising Counsel?

 Typically defined as any person who, for a flat

fixed fee under a written agreement, plans, conducts, manages, carries on, advises or acts as a consultant, whether directly or indirectly, in connection with soliciting contributions for, or on behalf of, any charitable or civic organization, but who actually solicits no contributions as a part of such services.

2014 State Charitable Solicitation Registration• Gammon & Grange, P.C. • www.GG-Law.com • 703-761-5000 • 10/31/2014• Slide 23

Registration Hints

 Carefully maintain a calendar of due dates  Complete registrations accurately, with public

consumption in mind

 Ensure that information reported in registrations is

consistent with what is reported in Form 990

 Ensure any professional fundraisers with which you

contract have satisfied their registration obligations

 Ensure contracts with professional fundraisers satisfy

regulatory requirements

 Ensure that professional fundraisers do not report your

• rganization as a client in states where your organization

is excluded from the registration statute

2014 State Charitable Solicitation Registration• Gammon & Grange, P.C. • www.GG-Law.com • 703-761-5000 • 10/31/2014• Slide 24

Recent Developments

 Arizona terminates its registration requirement

(except for veterans organizations)

 Nevada adopts a registration requirement, tied to

corporate registration http://nvsos.gov/index.aspx?page=1344

 New York amends financial audit thresholds; adds

audit committee requirement for New York entities

2014 State Charitable Solicitation Registration• Gammon & Grange, P.C. • www.GG-Law.com • 703-761-5000 • 10/31/2014• Slide 25

Recent Developments

 Florida adds annual conflicts of interest

certification requirement, among other amendments to its requirements www.nonprofitcpa.com/new-florida-law-tightens- rules-charitable-solicitation/

 A single portal registration system?

2014 State Charitable Solicitation Registration• Gammon & Grange, P.C. • www.GG-Law.com • 703-761-5000 • 10/31/2014• Slide 26

QUESTIONS

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This material constitutes legal information and is NOT legal advice. Because relevant laws may change from time to time, you should not rely upon this information, but rather should always consult legal counsel.