Make Your Fundraising Efforts Easier: Stay Compliant!
Fundraising is difficult, no matter how you slice it. Your fundraising team is hard at work finding prospects, writing letters and grants, “following up” countless times—you know the story. So why hamstring yourself further by ignoring state charitable solicitation requirements? You could be losing crucial gifts and credibility with donors without even knowing it.
Many fundraisers and nonprofit executives believe that being 501(c)(3) tax exempt is enough, but often it is not. Forty-one states require charities to register before they solicit donations from their citizens. Think of it as a license to fundraise. The purpose is to protect donors from unregulated and illegitimate organizations that may or may not be using contributions for a charitable cause.
By registering, your nonprofit discloses to the state and the public information about your mission, programs, leadership and finances. In return, your donors can search for your organization in public records, see who you are and where their funds really are going. This is a good thing!
So why is this important? First, it’s the law. States and the IRS want to know that the funds you raise support the cause you set out to do. Failure to register and late registration can be costly, too. For example, in Pennsylvania, by filing only after you receive donations, you potentially incur a penalty for each month you were unlicensed. In many states, it’s better to be proactive and register before you even start soliciting.
You could also be losing out on critical funding! Many foundations ask for proof of registration with your state’s charities official as part of a grant application. Without it, your application may be tossed out.
Most donors know they can get a tax deduction by giving to exempt organizations, but they may ask to see your charitable solicitation license as well. They want to know their funds go to the cause you advertise, and, as a charity, it is good to show your supporters you have nothing to hide! If you have not registered to solicit funds in your state, you may find conversations with donors cut short.
Charitable solicitation registration can be complex. Your organization must comply with applicable requirements in each state it solicits donations. Large organizations and ones mastering online fundraising must register and manage renewals each year in as many as 41 states. In order to save staff time, and to stay on the right side of the law, these organizations enlist the help of service companies, attorneys and other professionals.
At the end of the day, charitable solicitation compliance is worth it. By staying current with your registrations, you’ll avoid state fines (up to $2,000 per year in some states). Your fundraisers will have an easier time writing grants and communicating with individual and corporate donors. Most importantly, you reassure your donors that by choosing you, they’re making a good investment in the community.
Fundraising is tough enough. What are you waiting for? Stay compliant.