California Amends Digital Fundraising Regulation

California rolled out a new law last year to regulate digital fundraising platforms, with the goal of making the whole online fundraising process more transparent for donors. Now, that regulation, known as California assembly bill No. 488, has been amended.

The bill, which originally went into effect on Jan. 1, 2023, requires fundraising platforms and platform charities that operate or solicit donations in California to register with the state’s Attorney General’s Registry of Charities and Fundraisers (formerly the Registry of Charitable Trusts). Its aim is to prevent deceptive and misleading solicitations. 

Toward the end of 2023, the California Department of Justice proposed amendments to the bill, which were approved on March 26. Here’s a look at what changes were made to the bill.

Effective Now

Several changes to California assembly bill No. 488 were effective immediately upon approval. Some of these changes clarified terms regarding fundraising platforms and platform charities such as “conspicuous,” “donated funds,” and “partnering platform,” as well as defined the different types of solicitation mentioned throughout the bill. These include:

• Type A. “Round up” solicitations, such as a prompt when making a purchase to round up to the next full dollar amount. The “spare change” goes to a cause chosen by the company.
• Type B. Peer-to-peer fundraising solicitations through platforms such as GoFundMe.
• Type C. Cause marketing solicitations, where donors select the nonprofit.
• Type D. Cause marketing solicitations, where the company chooses the nonprofit.
• Type E. Solicitation through a CRM vendor, such as Bonterra, Classy and Blackbaud. 

Previously, the regulation outlined restrictions for soliciting and operating in California. The amended bill adds that fundraising platforms and platform charities can only solicit or permit solicitation, or receive, control and distribute funds for nonprofits in good standing with the IRS, the Franchise Tax board, and the California Attorney General. Notably, fundraising platforms and platform charities are permitted to hold or control donations or recommended donations for organizations not in good standing with the Attorney General for as long as it takes to find an alternate to send the funds to.

One new feature of the bill allows fundraising platforms and platform charities to share — with donors’ permission — the names and contact information of those engaging in peer-to-peer fundraising with recipient charitable organizations. This update enables nonprofits to steward these donors, which may improve their overall donor retention.

Other amendments effective March 26 include:

• Fundraising platforms and platform charities engaging in type C or D solicitations must disclose how long it will take to send donated funds to the recipient charitable organization.
• Fundraising platforms that fail to renew their annual registration or file a completed annual report, as well as platform charities that don’t file their completed annual report, will have their registration automatically suspended.

Effective June 12

Looking ahead to next month, a few other changes to assembly bill No. 488 will go into effect for platform charities and charitable fundraising platforms. These include:

Increased registration and renewal fees. Charitable fundraising platforms must register with the California Attorney General before soliciting or allowing solicitations. The registration fee was increased to $625 from $250. While the initial submission can occur at any time of the year, fundraising platforms must renew their registration every calendar year on or before Jan. 15. The renewal fee is also $625.

Trustee registration. Platform charities must register as trustees.

Required partnership paperwork. When a platform charity enters a partnership for solicitation with a fundraising platform, the platform charity must complete Form PL-3 (Notification from Platform Charities) no later than 30 days after the partnership begins.

Annual reporting. Fundraising platforms and platform charities must file an annual report on their fundraising activities for the previous calendar year to the attorney general on or before July 15 each year.

Effective Jan. 1, 2025

Moving into next year, the final batch of amendments will be put in place. One of the changes outlines certain requirements that must be met when a recipient charitable organization agrees to allow a fundraising platform or platform charity to solicit donations in its name. The key requirements include:

• When more than one charitable fundraising platform is involved in the agreement, the recipient charitable organization can select which platforms it does and does not give consent to solicit in its name.
• A recipient charitable organization can review and approve information about itself in the solicitation. If it doesn't approve, the information will be removed from the solicitation.
• If donors giving through solicitation types A and B designate how they want donations used, a recipient charitable organization will “be able to specify whether it agrees in advance to comply with the designations or restrictions.”
• If a recipient charitable organization makes a written request for the removal of the agreement, the fundraising platform or platform charity will ask for identifying information within three business days of the request. The recipient organization must provide that information within three business days of the request for information.

The amendment also set requirements for fundraising platforms and platform charities that engage with solicitation types A and B. Specifically, the main things they must do are:

• Send a tax donation receipt no more than five business days after a donation or recommended donation is made.
• Send donations to consenting recipient charitable organizations no later than 30 days after the month in which the donation was made (45 days after the month for non-consenting organizations).
• Provide the recipient charitable organization with the legal name of fundraising platform; total number of donations and recommended donations made; the time period in which these were made; date each was made, if requested by recipient organization; total dollar amounts of donation, fees, and donated funds sent; contact information for donors who want to share their information; and information on how they want funds used.

Platform charities and fundraising platforms engaging in solicitation types C and D must:

• Send donations to charitable organizations on a quarterly basis or more frequently.
• Provide the recipient charitable organization with a description of purchasing and other donor activity, including the time period in which it occurred, the amount of each donation or recommended donation, how the donation was calculated, and any fees imposed.

Fundraising platforms and platform charities engaging in type E solicitation must provide the recipient charitable organization with the date of each donation, the date the donation was sent, the dollar amount of fees, of each donation before and after fees, and of each donation sent.

Finally, effective at the beginning of 2025, donors and peer-to-peer participants will be able to check that their donations or recommended donations were successfully sent to a recipient charitable organization or alternate charitable organization.

“There’s no denying that, in recent years, charitable giving has been increasingly taking place online,” California Attorney General Rob Bonta said in a statement. “Internet platforms like GoFundMe, Meta and PayPal all make it convenient for Californians to donate to or support their favorite charities, but that convenience can come at a cost. With the final regulations that we are announcing …, my office will be better equipped to protect donors and charities, and ensure that donations are going toward their intended purposes.”