Must every charity register to solicit funds from the public? How do online donations fit into the picture? Warren Harmon, account executive at Harbor Compliance, answers these questions and more in this webinar.

Be sure to download their free white paper, where you’ll find:

  • Common forms of solicitation that may require registration
  • An explanation of the registration forms and process
  • How to approach online fundraising requirements
  • Potential penalties for noncompliance
  • How to decide where to register
  • Information on exemptions, renewal requirements, extensions, disclosure statements, and more.

Full Transcript:

Steven: All right. Warren, my watch just struck 2:00. Is it okay if I go ahead and get this party started?

Warren: Yup, that sounds great.

Steven: All right, awesome. Well, good afternoon, everyone, if you’re on the East Coast. Good morning, I should say, if you’re on the West Coast. Thanks for being here for today’s Bloomerang webinar, “Charitable Solicitation: What Does it Take to be Compliant?” And my name is Steven Shattuck, and I am the chief engagement officer over here at Bloomerang, and I’ll be moderating today’s discussion as always.

And just a couple of housekeeping items before we get going here, I just want to let you all know that we are recording this presentation and we’ll be sending out that recording as well as the slides later on this afternoon. So if you get interrupted today or you got to bounce early, don’t worry, we’ll get all that good stuff in your hands later on today. So just be on the lookout for an email from me.

Most importantly though, if you’re listening today, please feel free to send in any questions or comments right there on your chat box. We’re going to try to save some time at the end for Q&A. So don’t be shy. Send us your questions and comments along the way. You can also tweet us those things. I’ll keep an eye on the Twitter feed.

And if you have any trouble hearing us through your computer speakers, we find that the audio by phone is usually a little bit more solid. So if you’ve got a phone nearby and if you don’t mind dialing in, if that’ll be comfortable for you, give that a try before you totally give up on your a computer connection. We find it’s a little bit better by phone. There’s a phone number that you can dial into ReadyTalk. There should be a confirmation email that you got when you registered. It’ll have a phone number in there if you need it. So check that out.

If it’s your first Bloomerang webinar, I just want to say an extra special welcome to you folks. We do these webinars just about every week. We only miss a couple of weeks out of the year. It’s our favorite thing we do here besides our donor management software, kind of what we’re most known for. That’s what Bloomerang is. If you’re interested in that or maybe considering a switch next year from your current donor database software, check us out. You can even watch a quick video demo. Don’t even have to talk to a salesperson if you don’t want to. Get a nice little tour of the software, see what it’s all about. So check that out.

Don’t do that right now. Got a really cool session coming up here. My buddy Warren from Harbor Compliance is joining us. Warren, how’s it going? You doing okay, man?

Warren: It’s doing well. Yeah. Thank you so much for having us, Steven.

Steven: Oh, yeah, we wouldn’t miss it. We love having you guys. This is actually the only webinar that we do a repeat version of every single year. Every other webinar is totally unique except this one because I feel so strongly about the information. This is a really important topic, and that’s why we put it on our schedule every single year. And Harbor Compliance is my go-to and hopefully, it will be your go-to for all things compliance-related. It’s in their name after all.

And Warren, great guy. Got to meet him in person a couple of weeks ago at an event. Just a wealth of knowledge. He’s an account executive over there, but he handles all of the charitable solicitation compliance needs for their client. So he’s the go-to guy for this topic and he’s going to tell you basically kind of how to stay out of trouble and make sure that you stay compliant with all of your fundraising endeavors. So, Warren, I’m going to hand things over to you to tell us all about compliance. So take it away, my man.

Warren: Great. Sounds good. Thank you again, Steven. Thank you everyone for joining us today to discuss charitable solicitation requirements and what it takes to be compliant. A very important topic and we’re going to dive through a bunch of information today, so I’m looking forward to that.

As Steven mentioned, my name is Warren Harmon, and I’m an account executive at Harbor Compliance. At Harbor Compliance, we partner with organizations in every single state in over 25 countries abroad to help them solve their most challenging compliance problems. Our clients range from some of the largest organizations in the country to fast growth startups and our deep industry expertise allows us to fully manage government licensing compliance for the nonprofit sector.

On your screen, you’ll see a few of the charities that we help keep compliant across the country. My role as an account executive is first and foremost to be an educator on compliance and the various requirements that nonprofits are facing. I also help act as a facilitator for organizations that are looking to take action to become compliant and engage with us. Today I’m going to cover the top five things that you need to know about charitable solicitation compliance. Most of this presentation is geared towards charities, so if you’re an accountant or a consultant, you can think how these requirements may apply to your clients.

So what we’re going to cover today, the first thing would be state registration requirements. Number two would be online fundraising, why compliance should be a priority, what it takes to register including the cost, and how to manage these registrations and simplify the process. So let’s dig right into number one. First and foremost, you’ll need to know what exactly we’re referring to when we’re talking about state registration requirements. Let’s break that down. In simple terms, charitable solicitation is fundraising. Compliance is meeting the various IRS and state requirements that allow charities to fundraise.

Today we will be focusing on the state requirements, specifically the requirement that charities registered in order to solicit donations. You’ll see a quote from the IRS on your screen. “Many states have laws regulating the solicitation of funds for charitable purposes. These statutes generally require organizations to register with the state agencies before actually 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 activity involved paid solicitors and fundraising counsel.” As you can see, generally charities are required to register before they begin soliciting. Charitable solicitation requirements are really based on the app of soliciting. The key word in these requirements is soliciting itself and not necessarily receiving donations.

So the map here on your screen shows the states that have a license requirement for charitable solicitors. The states in dark blue require only registration. States in yellow require registration and disclosure statements to be included on your solicitations and the states in light blue require only disclosure statements to be included on solicitations. We will get into disclosure statements in more detail later on in the presentation.

So many nonprofits wonder whether charitable solicitation requirements apply to their organization and what states. Chances are an organization that fundraises will face these requirements one way or another. Again, the requirements are based on the act of soliciting regardless of whether or not donations are received.

So what is solicitation exactly? Solicitation is simply asking for donations that can take many forms. The most common ones are holding fundraising events, mailing out letters, placing phone calls to prospective donors, any type of marketing materials. So some at this stage generally treat a solicitation that may be surprising you include applying for grants, collecting membership dues, and collecting donations through the organization’s website. Additionally, using professional solicitors, fundraising council and commercial co-ventures not only trigger the requirements, but maybe scrutinized by states and even greater detail. Also, any for-profit entities that assist charities with fundraising generally need to register with the states as well.

So many organizations solicit using several of these methods, any one of which would trigger state registration requirements and many organizations solicit more than just one state. Knowing where the organization is required to register means taking a close look at your solicitation activities in each of the 41 states that have requirements. If you’re soliciting in any of these states, you may be based with requirements to register there.

So that brings us the number two things that you need to know about charitable solicitation compliance, online fundraising and its implications. Some of the biggest questions we get are related to online fundraising. People ask, “If we fundraise through our website, does that mean we have to register in every state? Or if we fundraise online but only received donations in a few states, do we still have to register in every state?” You’re not alone if you have these questions. Organizations throughout the country are facing the same uncertainties.

Most charities nowadays fundraise online, a lot of organizations accept donations on their websites through using a Donate Now button. In addition, charities commonly makes solicitations by email, including asking for donations in their email newsletters. Social media is yet another form of solicitation. All of these websites allow charities to solicit residents of every state at the click of a button. This, of course, raises questions about how to comply with state charitable solicitation registration requirements.

So in order to clear things up, in 2001, the National Association of State Charity Officials met in Charleston, South Carolina to try to develop guidelines for what an organization would need to register. Their results are known as the Charleston Principles, which you may have already heard of. Basically, the Charleston Principles suggest that if you have a Donate Now button on your website, you should be required to register in given state if you either send targeted emails to the resident of that state or receive ongoing repeated or substantial donations from that state.

The biggest problem with the Charleston Principles is that by admission of their authors, they’re really an academic exercise. They weren’t codified into law and aren’t useful for determining registration requirements. Fundraising online is generally considered soliciting nationwide because Donate Now sections on charity website, emails to newsletter subscribers, social medias are all solicitations that can reach citizens of every state. When charities receive donations as a result of those solicitations and then follow up with those donors to ask for additional donations either by email or any other method, those charities are furthering their charitable solicitation activities.

Now, there are a couple of practical approaches charities can use to be compliant and when they fundraise online. The most comprehensive way to be compliant would be to register in all 41 states or file for an exemption in the states in which the organization is eligible. For many organizations, registering in all 41 states is the best option so that they can fundraise nationwide by any method, including online, while not risking the various penalties and risks associated with not being registered. I’ll cover this risk in more detail in a moment.

Now we recognize that not all organizations have the ability to register in all states. Budgetary constraints are a common challenge, particularly for very small charities. For these organizations, the second approach might be better. With this approach, an organization registers in as many sates as it can and then specifically excludes the remaining states that require registration from where it accepts donations. So this would mean that the organization places language on its website stating that it does not accept donations from those states.

Ultimately, organizations have to weigh the cost of registering in a state with the opportunity cost of not being able to accept donations there. We encourage organizations to register and focus on compliance rather than try to fly under the radar. Penalties for noncompliance can be severe, so we strongly encourage organizations to take the path of compliance.

So where do we need to register at? Given what you know about your requirements and when they apply, let’s take a look at where that needs to happen. First, you’ll want to check to see which of the 41 states you were soliciting. You would generally need to register or file an exemption in each of these states. Exemptions are based on the type of organization, its solicitation methods, and its revenue. Ironically, most exemptions need to be applied for and also renewed.

The best way to become compliant is to research thoroughly your specific registration and exemption requirements in each state where you solicit. Even though your organization may be exempt in a state that has a revenue threshold for exemptions, again, it’s generally the act of soliciting that triggers registration requirements, not receiving the donations in each state. A great way to take action towards becoming compliant is educating your organization on what solicitation means and the various activities that trigger those requirements.

So on to number three, why compliance should be a priority. By now you’re probably realizing that your organization will need to register in at least a few states and potentially all 41. Now we realize this can all sound very overwhelming and it definitely is a significant project. Presenting these facts to the other people within your organization generally elicits a few common responses, things like, “Well, we’ve been fundraising for years without registering. We’ve never heard of any of these problems, so why should we care now?” Or, “If these requirements have existed for so long, why are we just now hearing about them?” Or possibly, “Do we even need to bother complying with these requirements?”

While the requirements have existed for many years, actually since the ’60s, states are becoming more stringent with the enforcement of charitable solicitation regulations. State agencies that one served simply as a registration office now have CPAs and prosecuting attorneys on fulltime staff to audit, investigate, and prosecuted illegal activity in the nonprofit sector, including those relative to charitable solicitation laws and they do so to protect, not only donors in their state, but also will legitimate charities as well. In fact, an Urban Institute survey of regulators found that fundraising abuses were the most common area of enforcement by state charity officials followed by the trust enforcement and governance.

For example, California holds board members personally responsible for any penalties levied against the organizations that fail to register. They’re not allowed to pay those penalties out of the general fund, instead, it comes out of their own bank accounts. This is just one example. Other common repercussions include state fines, forced financial audits, loss of state tax exemption, and even revoking of the right to solicit within a state, not to mention the PR nightmare violation like this could produce.

Example that comes to my mind is a few years ago when the attorney general of Ohio was holding fundraisers for a charity that had not been registered with the state, that’s the guy who oversees all charity registrations in his own state. Let’s think about that for a little bit. The press got a hold of it and he really caught a lot of flak from his constituents.

So no doubt the negative consequences are out there. But your organization can avoid them by taking steps towards registration. The benefit of a proactive approach is that it generally avoids penalties rather than invite investigations or further scrutiny. I’ve got a quote here from the former Pennsylvania Director of the Bureau of Charitable Organization. It’s taken from a speech he gave to a group of nonprofits and it explains his take on being proactive. He said, “If you were coming in voluntarily, even if you had been violating the law for 10 or 15 years, you’ve always got to pass. Bottom line is, you want to try to register voluntarily and be proactive.” As you can see, the state wants to encourage organizations to register and maintain compliance. They don’t want to chastise groups for trying to do the right thing. In fact, states are more likely to try to resolve a misregistration through informal resolutions, correspondence with organizations, or settlements, than through fines, penalties, or litigation.

So charities, of course, have an obligation to be compliant in every state in which they fundraise. Organizations that raise funds in every state must generally register in all 41 states with requirements that may represent a substantial investment of time and effort, but the upside is tremendous. It’s basically a license to fundraise without borders and without inhibition. Not only that, but it could even result in an increase in revenue. Studies show the charities that include disclosure statements, which are part of the solicitation registration in many states on their solicitations get a better rate of return. That’s because donors gain reassurance in the fact that that organization that they’re giving to is in fact compliant. No responsible donor wants to give to an organization that doesn’t follow the law.

So at the end of the day, charitable registration requirements are law. Your organization should treat these requirements just the way you do your 990 filing requirements, financial review, or audit requirements. Registering for charitable solicitation and renewing those registrations should be included on your organization’s list of ongoing tasks and the cost associated with it should be budgeted line items. If your organization hasn’t faced any corrective actions to this point, take this as an opportunity to become registered and prevent them from ever occurring. Becoming registered provides your organization a license to solicit and apply for grants.

Registration statuses are reflected in the state database of charities which donors and grant makers can easily access anytime. In fact, 92% of regulators indicate that they conduct internet research on nonprofits regularly. More sophisticated corporate and individual donors are using these databases to look up the charities they donate to. So it only makes sense that you want to make sure you’re registered and active with the states for these reasons.

So in the most basic sense, maintaining legal compliance is a basic practice for best practice for a nonprofit and is a major area of the standards of excellence, code of ethics and accountability. Fundraising and licensing compliance are important aspects of running a lawful and responsible organization.

The first step towards compliance is sharing these facts with your executive leadership and ideally, your board members as well. Your organization’s leadership has a lot at stake, both personally and in terms of their duties as leaders of the organization. Many board members are not fully aware of the requirements, the risks of noncompliance, or the benefits of investing in compliance. Now that you understand these details, take initiative to start the conversation within your organization. Emphasize the importance on everyone becoming educated on the topic and advocate for prioritizing compliance.

All right, so that leads us to number four on our top five list of things that you need to know about charitable solicitation compliance. What does it take to register, including the cost? We’ve talked a lot about your organization is required to register and where, but let’s talk briefly about what it takes to register, the how.

The details in each state are very different, of course, but on a whole, you can think of getting registered in four phases. Research, apply, monitor, and renew. Let’s start with research. It’s important to know your current status prior to filing anything, whether you are not registered, incompliant, or in bad standing. Depending on your situation, you will have a specific application, a state fee usually based on your revenue, and supplemental documents like your latest 990 or your IRS determination letter.

In some states, there are certain prerequisites before you can register to fundraise. For instance, you may have to form qualify the nonprofit corporation and appoint a registered agent. Knowing these requirements upfront will help you save time by avoiding rejected applications.

So once you’ve researched what’s necessary in each state, it’s time to apply. In each state, you will have to complete the necessary applications accurately and compile required documents. It often takes a line by line review of a form and its instructions. Once you’re sure you have everything, you have to ensure proper delivery. Sending the applications to the right agency and address is pretty obvious, but you might be required to file online or by email. You may have heard of the unified registration statement, the URS. This document was created in an effort to streamline the application process in all states, however, not all states accept this document and many require additional supplements to be included. The URS itself is longer and more complex than regular state form. And trust me, state examiners do not prefer the URS over their own documents. They often take longer to approve the URS than their own forms.

So what does this all cost? As you might suspect, the answer depends on the organization, on the annual revenue, and also the number of states that it’s registering at. But we can answer this for you today in more general terms. If you were to register in all 41 states, total state fees would likely range between $1,400 and $5,000 for most organizations. Now, please keep in mind that this is an estimate of the total fees if you were to register at all 41 states.

You sometimes get confusion on this because it is not a per state rate cost. In fact, single states registration fee is usually pretty reasonable, $25, $50, $100, sometimes nothing at all. So since many of you might not have to register in every state, this should be reassuring. Most states are simply not that expensive to comply with.

So to give you a rough idea of what that might look like, applicants with under $100,000 in gross revenue are generally on the lower end of that $1,400 to $5,000 range. As you approach half a million dollars, you will probably fall somewhere in the middle, you know, $2,000 to $3,000 range. Applicants with over $1 million in gross revenue per year are probably look at on the higher end of those fees, so closer to that $5,000 range.

So once your applications are submitted, you have to monitor your registration status and see them through to approval. And it can become a waiting game. Some states will actually take a couple of weeks to process your application, but in others, you may be waiting months. During that time, you will be busy ensuring that they were received and are being processed. And even bigger challenge is resubmitting rejected application, dealing with the state errors, and creating a system for tracking all of the registration information and renewal dates moving forward.

Many of you already know how much of a time commitment this can be. For those of you who haven’t personally done these registrations, you can probably expect to spend hours researching and have weekly, if not daily tasks to manage these filings. Tracking application acceptance and renewals without technology is really difficult too. And, of course, it’s usually an executive or a high level staff that has to take care of it all. I bet you can think of better uses of their time.

The time to completion of initial registration can be between two weeks and six months. Some of it varies from state to state and what the state processing times are, but through efficient management of the process, sending in the right applications and complete applications can all ensure that the processing times are on the low end.

States require you to renew the registrations. Most states have an annual renewal period, however, a few states renew biannually. They’re tracking renewal dates and making sure they are filed on time is extremely important. With this in mind, let’s talk about managing compliance on an annual basis. To move forward, getting to identify the states in which your organization is required to register and develop a plan to become compliant.

So finally, number five, I want to talk about how to manage these registrations and hopefully simplify the process. Just like with the initial registrations, you will again prepare a state renewal application, determine the appropriate fee, which again is usually based on your revenue, and compile the required supporting documentation. The difference between initial and renewal filings is that the renewable filings have a hard and fast deadline. The dates usually assess penalties if you miss a deadline, so again, it’s very important and critical to stay on top of these.

After the organization, it becomes registered to solicit. It’s important to keep excellent records of license numbers, registration, dates, and due dates. You’ll need to have a good system of the tracking for tracking this information in one place. Many of our clients have it some combination of an Excel spreadsheet or a calendar system for reminders. We find that they aren’t always helpful in tracking changes in state requirements and monitoring extensions of time to file.

I do want to mention extensions briefly. If your 990 and financial data aren’t ready before a state deadline, you have to file a request for more time to file the charitable registrations. It’s similar to your 8868 extension with the IRS, but in each state, the process is, of course, different. So filing extension can give you much needed relief while you were waiting for your 990 year audit so that you can stay in good standing.

So finally, about 25 states require you to include specific disclosure statements on your solicitation materials. Disclosure statements inform owners where they can find more information on your charity’s leadership, finances, and activities. These statements should be listed on an appeal letter, websites, and any other place where solicitations are being made. Just like everything else, disclosure statement requirements also change, so it’s important that you stay informed of the changes and update your solicitation accordingly. And remember, studies show that donors respond more favorably to solicitations with disclosure statements on them. It adds credibility to what you’re sending.

Managing compliance will eventually become second nature to you. Just like filing a 990 each year, you could still expect to spend a lot of time preparing and tracking renewals. You also need to stay abreast of any legislation changes or statute changes. At any time, reporting requirements and due dates change such as in Nevada this past September, states add and remove registration requirements too. Sometimes these dates aren’t even nice enough to tell you when this happened, but unless you’re really following the industry, I probably wouldn’t count on that.

So our solution, we talked through the various complexities involved in managing both charitable solicitation registration and the renewals. Hopefully, at this point, we’ve all conveyed the importance of charitable solicitation registration and why your organization should be prioritizing compliance. If you know your organization is not yet registered in all the states that it should be and you’re not yet under any sort of government inquiry or audit, this is an opportunity to register proactively. In doing so, you’ll be avoiding the potential consequences of noncompliance.

Remember, we generally don’t see government agencies open investigations or impose sanctions on organizations that register in good faith. Really, the best outcomes can be achieved through proactive registration. All in all, charitable solicitation registration across the 41 states can demand hundreds of hours from a qualified individual, both initially and ongoing. We’re talking about a substantial drain on staff time, and that’s exactly why we’re here.

We’d like to take just a few minutes to provide a brief overview on our services. We fully manage each and every step of the process, start to finish from research, to preparing the applications, cutting out the state filing fee checks, compiling and mailing out the packages, doing the necessary follow-up with the states, monitoring those approvals, loading all of that information into our proprietary tracking software and sending you the approvals. We really do reduce every single bit of administrative work on your part.

So going forward, our software tracks all of this information for you. Again, you don’t have to lift a finger on the renewal applications. We will do all the work. Really, you just need to provide signatures on the applications where applicable and send us your updated 990 financial data on an annual basis.

Just to be clear, the software is for reporting purposes only. It’s not intended to automate preparation of the applications. Our specialists actually, in-house, prepare these applications for you. We found from experience that no software can effectively account for all of the contingencies at play here. None would be sophisticated enough to take into account the infinite number of complexities involved in choosing the right state forms, completing the applications, determining the state fees, filing the exemptions as needed, completing the follow-ups with the states, etc.

For these reasons, we manage all of the applications ourselves by hand in-house, but what our software does offer and what you get through our service is the reporting insights. Our software informs you of current statuses of the registrations, where we’re at in the process, where the states are at in the process, the state filing fees, and the renewal due dates, all of which can help you plan and budget and your colleagues within your organization are easily kept abreast of your registration status. I can assure you that your boards, especially will appreciate that.

Our client portal allows you to add as many users to the account as you’d like at no additional cost so that your leadership, your staff members, even outside counsel and accounting teams can access the software. The image on your screen gives you an idea the types of reports that the software can create.

So for all the accountants on the call today, we also offer firm-wide partnership opportunities. Our nationwide registered agent office network allows to help you no matter where your clients are located and our unlimited user model enables you to manage each and every one of your clients for-profit or nonprofit. Charitable solicitation licensing is just the tip of the iceberg as we offer industry and occupational licensing across all sectors and we routinely partner with marquee brands and institutions to create co-branded educational materials that benefit your client and the industry as a whole.

All in all, our approach to charitable solicitation components is to provide full service management at a flat rate per state rate. We bill for our services on an annual basis and we don’t use any hourly billing. You’ll get to take full advantage of our team of experts to manage the process for you, and again, limit the time spent on your end facilitating signatures and sending 990. So that wraps up my presentation. Steven, I’ll turn it over to you, and we can run through some of these questions.

Steven: Yeah. Thanks, Warren. We’ve got a lot of really good questions already and I have a feeling, we’ll get some more over the next maybe 20 minutes or so. I love it. I love hearing this presentation every year. Good reminder. And it always generates a lot of really interesting questions. So I’m going to dive right in, if you don’t mind. So here is one from Aaron. Aaron’s wondering if they’re applying for grants that originate in different states, do you need to register in those states? So if you’re applying for a grant coming from a specific state, does that also require you to register there?

Warren: Yeah. That’s a great question. So we’ve actually had clients call us and ask that that exact same question. So generally speaking, by completing a grant proposal and submitting that, you’re asking for the grant, you’re asking for something of value. So generally, that does trigger the requirements to apply for these fundraising registrations.

Steven: Okay. So this covers the grants as well. Okay, got it. Kayla here is asking that . . . Oh, go ahead.

Warren: I was just going to say, we actually had some foundations that, you know, before they even reviewed grant proposals, they asked to see that they had a charitable solicitation registration in place. So that’s been a very, very common question of ours.

Steven: Cool. Okay. You mentioned board liability early on, which I think triggered this question. If a board member has, the D&O insurance, that doesn’t make them exempt from that liability? That just sort of covers it with insurance, right? But there’s still the liability, right? Even if you have the insurance?

Warren: Yeah. Yeah. So California, specifically, the way that they governed the particular requirements that if a nonprofit is not registered, if it were to come to this point, they can personally go after board of directors and officers of the organization and none of the funds for those penalties can come out of the nonprofit organization’s general fund. It has to specifically from the board of directors and the officers there.

Steven: Okay. Got it. Cool. What about internationally, Warren? Do you have to do anything to fundraise outside of the U.S. if you are a U.S.-based nonprofit?

Warren: So that’s another really good question. Here at Harbor Compliance, we don’t necessarily get involved with any of the international [Marino 00:33:02]-regulatory requirements there. We have [run a 00:33:06] call so that a couple of other countries do have a very similar form of a fundraising registration, but that is unfortunately, something at this point that we have not gotten into just due to the complexities and the nature of being that it’s internationally. So unfortunately, I can’t answer that question too well.

Steven: Okay. Yeah, I know there’s a lot of things with like the privacy laws in Europe, so you might want to consult someone specifically for that. Okay, here’s one from Bob. If we haven’t registered with an individual state, can they still use a fiscal sponsor to solicit on their behalf within that state? So kind of that pass through with this fiscal sponsor.

Warren: Yeah. And that’s very common. A lot of, you know, nonprofit organizations, they’ll work directly and they’ll have a fiscal sponsor and as long as the fiscal sponsors registered, then that really shouldn’t hinder their ability to be, you know, go out and solicit at that point.

Steven: Okay. Cool. Wow. The questions are just kind of streaming in here. I’m just going to go from top to bottom. Do churches need to do all this, the more to kind of a traditional 501(c)3? Does this apply to houses of worship also?

Warren: So educational and religious organizations, there are many states that do grant exemptions. Now, there are certain activities, the way the organization is structured, the particular fundraising activities that are occurring. It varies state by state. So that, again, is part of our process, is selecting all of our client’s information. The first thing we want to achieve are exemptions, of course. So during that initial onboarding process, we do our due diligence and we collect that information from the organization and we’ll reach out to the state directly and review, again, that particular situation to determine if you’re eligible for an exemption. Again, many states do offer exemptions for educational organizations and religious organizations. So of the 41, just kind of a ballpark here, I’d probably say about 10 or 15, and then we’ll grant exemptions right up right out of the gate.

Steven: Okay. So likely that maybe a church would be exempt, but still might want to go through the process, sounds like?

Warren: Yeah. Many states will allow for an exemption for a church. There are still going to be some states though, are still going to require them to register though.

Steven: Okay. Do you need to have 501(c)3 status to go ahead and register? I think that’s just a question from a newer organization, not sure if they should be proactive with registering or should they just wait until the 501(c)3 paperwork comes through?

Warren: Yeah. So there’s about 10 or 15 states that will specifically ask for the determination letter when going through this process. That’s one of those supplemental documents that accompanies with the filing itself. So with that being said, there are a handful of states where they can submit registration and get approved while they’re in pending status with the IRS. But then there are going to be, again, 10 to 15 states that will require that determination letter.

Steven: Okay. Cool. Okay. We’ve got a few questions about disclosure statements. So you mentioned putting that on the actual fundraising appeal as kind of a way to, you know, build trust or, you know, keep confidence to the donor. Where else should you put that? Should that maybe beyond like your website or maybe I’m email solicitation, should it go anywhere else besides just those letters?

Warren: Yeah. So of the 25 states that have to solicit their disclosure statement requirements, there is specific language that needs to be with on or within the marketing material that’s going to that particular state. Now, we’ve seen some of our clients and we’ve seen just in the industry as a whole that a lot of people are starting because of technology. They’re starting to put, you know, all those disclosure statements of the 25 states in a certain section within their website. And then referencing the URL on their marketing materials.

Can you imagine having to put, you know, 25 state disclosure statements that range from one paragraph to 10 paragraphs on one piece of, you know, marketing material that you’re putting in the mail? It would be ridiculous. So what people are starting to do is put a link back to their website, you know, in the privacy section or somewhere that they designate on their website and they’ll list state by state each disclosure statement and go about it that way.

Steven: Okay. Another question from a newer organization, they’ve got their 501(c)3 but they have not yet filed a 990 yet. Is it required that they have a 990 to go ahead and register or is the letter stating that their 501(c)3 enough? I mean, this seems like the 990 isn’t something that’s needed, right or maybe I’m wrong about this?

Warren: So there are some states that will also require the 990 as part of the package of documents that we’re sending off. However, brand new organizations that have not yet completed in 990, generally what the state will do is they still ask for some financial information, which more than that, then they can go to their accountant and just kind of get like ballpark figure for where they’re at year to date if they haven’t completed the 990, and that’s a pretty straightforward process. I mean, it’s a couple of questions like total contributions, gross receipts, revenue. And again, that’s something that’s pretty straight forward because they haven’t yet completed the 990 and that will suffice.

Steven: Okay. Here’s a question similar to the fiscal sponsor, are there other situations where you can sort of piggyback off of organization’s registration? So this question is coming from an organization that has a sister organization in every state and it seems like that this organization has registered everywhere. Is that good enough or should that other organization also register just to be safe?

Warren: So the way the entity is structured or the organization is structured, they have separate EIN numbers that each EIN number or each entity would have to register for the charity registrations on their own independently.

Steven: Okay. So the individual EIN is the . . .

Warren: Now . . .

Steven: Okay.

Warren: Yeah, that’s really the identifier. Now, if it’s like a chapter where they’re all rolled up underneath one, you know, mother company, so to speak, and they only have the one EIN numbers but the chapters kind of operate on their own, then those individual chapters would be based off of the mother company that EIN and the registration would be under that.

Steven: Okay. Okay. Got it. All right. More than a few people, Warren asked, where can they go to register? Is there like one website where they can just do every state all at once or see what the individual state requirements are? What’s a good resource for folks going forward?

Warren: So I would definitely highly encourage taking a look at our website at Up in the right-hand corner there, there’s a tab that’s labeled Information Center. Once they click on that Information Center, the next page will take them to three different industries that we, you know, are currently servicing for our clients and they have a tab there, a button for fundraising registrations that’ll be an complete map of every state and it’ll be highlighted in blue for the states that have requirements.

You can actually click down and drill down on the individual state and look at every single registration requirement that that particular state has, which would include these charity registrations that we’re talking about. And a lot of the states, so all of the states within our information center, as you click down on the Fundraising Registration tab, there will be a link that will take you directly to each of the state’s websites, which will give you a step by step of what their process is, what their requirements are. But again, that’s what we do. We can streamline that process, start to finish and complete those registrations, but there is great information and great resources on our website.

Steven: Yeah, I’m looking at that now. This is a really cool . . . it’s like an interactive map that folks can click on, on each state. Wow. Indiana is like the lone, no registration required surrounded by the states. It’s pretty interesting. Yeah, you guys do a really good job of like giving stuff away for free. So I put that link to that in the chat so people can get to that pretty quickly.

Okay. Here’s a question from Phoebe. Can you please provide an example of how a state might require a charity to provide a disclosure statement on marketing materials? What’s kind of a typical guidelines for that? I assume they’re different by each state, but is there a kind of a similarity between most of them?

Warren: No, there’s actually not, and that’s another thing that you can also look up in our information center. Each state has different language, you know, specific to the organization. Some states, again, will want to know certain information about the directors, the officers, some will actually include the license number. Some of them have a date of when the organization was started. So another thing there, in the information center at, if you were to type in the keywords Disclosure Statements, it’ll give you a state-by-state breakdown of where those requirements are and what the required language is. We also give that out for free as well.

Steven: Very cool. Cool. Here’s one from Dawn. If you have a disclosure statement on your website that you can only accept donations from certain states, so assuming that the ones you’re registered in, what happens if someone just kind of finds their way to your website and they’re in a state that you’re not registered in and they donate? Are you technically out of compliance at that point?

Warren: No. So that’s a really good question. And you know, as I mentioned earlier in the presentation, really it’s the act of asking that elicitation is really what triggers these requirements. Now, by having a Donate Now button, you’re preemptively giving the ability for someone in any state or jurisdiction to give you something of value. However, by putting that type of, you know, disclaimer that language around your Donate Now button that says, “We’re only registered in the following states, we cannot accept donations from any of the other states because we’re not registered. However, if you feel as though you’d like to donate, give us a call.”

So then you’re giving yourself the opportunity if a potential donor says, “Hey, I want to donate $50,” well, maybe it doesn’t make sense because the state’s filing fee may be more and you just decline that donation. But if it’s $10,000, at that point you can look at getting registered.

Now, again, the way the states look at it is, are you actively soliciting? If you are stating that you are not registered and you cannot accept that donation and someone’s still continues to proceed and make a donation, that could be considered an unsolicited donation. So generally speaking, in that type of situation, you’re not soliciting, it’s an unsolicited donation, which should be okay to what the state say.

Steven: Okay, that makes sense. So you can kind of still cover yourself, but still, maybe you get the donation. Okay, that makes sense. So I got a question of my own, Warren, if you don’t mind delegating me. I think this is maybe the fourth year we’ve done this session. Does this change much year to year? I didn’t go back and listen to last year’s presentation prior to this, but is there a lot of changes that happen year over year that you should maybe kind of stay abreast though or what do you recommend to folks just to make sure that they’re always on the up and up, I guess is my real question?

Warren: Yeah. So the states are constantly making changes. I mean, just two states this year alone . . . it’s actually three states, Virginia, Nevada, and Florida all made changes to their disclosure statement requirements. And again, they don’t generally send out a postcard or a mailer and say, “Hey, we’ve made some changes.” People are kind of left in the dust. So that’s what we do, we have analysts in house who are constantly monitoring these state changes based on statute changes, legislation changes. So we’re keeping abreast with that.

But in terms of the presentation itself, it’s a pretty general in terms of what do, who we are, or how these cool requirements apply to nonprofits. So we don’t really give too many specific examples on states within this presentation. So overall, it’s probably going to be pretty similar, but 100%, states are constantly changing things just the way . . . I mean, a lot of states now we’re going to online submissions or by email. We had a situation where we were filling out paper applications for several our clients when we submitted them and the states came back and said, “Well, we now have an online portal. You need to create an account to make your filing through there.” They made no one aware of that. So those are the types of things that we think, you know, we’re doing our best here to stay abreast of those changes as they occur. And, you know, again, we have analysts who are monitoring all the states situations there.

Steven: Cool. Okay. So we talked about churches. Was that membership groups, if you’re soliciting someone to become a member of your association, perhaps, is that the same as the charitable solicitation? Does that fall under a different sort of category?

Warren: So generally member organizations, there are a lot of exemptions. So the majority of states offer exemptions. However, again, it kind of gets into that gray area where, you know, you receive a membership due, but then you send them a thank you card and say, “Hey, would you like to make an additional donation here?” At that point, you’re actively soliciting. If the membership due is based on a subscription or a certain area there, that should be okay, but by asking for something of value after the fact, that’s where you get into the area of may needing to register.

Steven: Got it. Okay. I think we got through all of the questions. We answered 17 questions, somehow. So if you haven’t asked the question, now’s the time. Oh, we do have one. You mentioned a database that regulators look at, Warren. Did we hear that right? Is there’s somewhere that regulators can look to see if your organization is compliant? Is there’s some sort of centralized place for that?

Warren: Yeah. You could Google search any state and just type in Charity Bureau Division of Florida. All these databases are public. So that’s one area that I really like to stress that your corporate partners, your retailers, your large donors, and even smaller donors as well, a lot of them can go online and they can type in your organization and see if you’re properly registered.

So being registered, you know, proactively as is one, a great thing, but two, wearing that as a badge of honor and posting that you have your registered and that you have license numbers and displaying them for your donors to see and by entering a state database, that’s a great thing because by not being registered, you could be missing out on, you know, potential donors by not being registered because they’re verifying whether or not you’re registered, looking at those state databases.

Steve: Yeah. It happens. I believe it. Yeah. Anything you can do to add that trust factor seems to be worth it. Okay. Well, how can folks hear find out more about you guys over at Harbor Compliance? What’s your best way to get a hold of you, Warren?

Warren: Yeah, so my email address is up there on the screen. Again, I’m an account executive here. I head up our nonprofit sales team. So if you have any questions or would like to follow up with the call, feel free to send me an email. I can reach out to you and we can schedule a time to connect the call or we can go through my email, whatever you prefer. But again, I would highly encourage everyone to take a look at our website. Our marketing team does a fantastic job. There’s about 5,000 pages of content out there and we’re constantly collaborating with other organizations to come out with new content that’s very educational and explains a lot for our clients.

Steven: Yeah, I really trust these guys. So I’ll put in my vouch for them. We have some mutual clients and nothing but happy reviews and a good feelings from them. So check them out for sure. That software, it’s pretty slick too. You might want to look at that. We had more than a few people asking about your sort of pricing, Warren, so I have a feeling you’re going to get some emails. So yeah, this is awesome. Thanks for doing this again. You know, every year coming back and educating people. I love that you’re all about the education, so thanks for doing this, Warren. I really appreciate it.

Warren: Not a problem at all. Thanks for having us, Steven. It was great.

Steven: Yeah, we’ll have you again that next November the year-end giving season. Seems like a good time to do it as well. Well, we can keep the conversation going for sure. We got lots of resources on our website, including our webinar series. Keep on trucking. We’ve got a great session next week, same time, same place. We’re going to talk about Facebook fundraising can sometimes be a little bit of an enigma for folks, but my buddy Sean is going to give you some case studies on how specifically you can use Facebook to raise some money just in time for Giving Tuesday to some time for yearend giving. Going to be really good session. I got a peek at the slides earlier. It’s going to be a fun one. So hopefully you’ll join us again the timely session for sure.

If not, or if you’re busy, predisposed, then we’ve got some other webinars you can schedule or register for through the end of the year already. So check out our webinar page. You might find a session that piques your interest. We’d love to see you again some other Thursday coming soon. So look for an email from me with the slides and the recording. The recording will include the Q&A, by the way too, so we’ll send that as well. And hopefully we’ll see you again on another Bloomerang webinar. So have a good rest of your Thursday, have a safe weekend. Stay warm out there and we’ll talk to you again soon. Bye, now.

Kristen Hay

Kristen Hay

Marketing Manager at Bloomerang
Kristen Hay is the Marketing Manager at Bloomerang. From 2018 - 2020, she served as the Director of Communications for the Public Relations Society of America's local Hoosier chapter. Prior to that she served on several different committees and in committee chair roles.