Charitable solicitation compliance is not optional. It is the law.
In this webinar, Brock Klinger of Harbor Compliance covers how to keep your nonprofit compliant when it comes to asking for a donation, including fundraising online.
Steven: All right. Brock, my watch at 1:00. Is it okay if I go ahead and kick us off officially?
Brock: Sounds great, yeah.
Steven: All right. Great. Well, good afternoon everyone if you are on the East Coast, and good morning if you’re on the West Coast or somewhere in between. Thanks for being here for today’s Bloomerang Webinar, Charitable Solicitation Compliance: 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.
Just a couple of housekeeping items before we begin officially. I just want to let you all know that we are recording this presentation, and I’ll be sending out that recording later on this afternoon, as well as the slides, in case you didn’t already get those. So if you have to leave early or perhaps you want to review some of the content, have no fear, you’ll be able to get all those resources later on today. Just be on the lookout for an email from me in about couple hours or so.
And as you’re listening today, please feel free to use that chat box right there on your webinar screen. We’re going to save some time for Q&A at the end. So don’t be shy. Don’t sit on those hands at all, send us any of your questions or comments. You can do the same thing on Twitter. I’ll be keeping an eye on the Twitter feed as well, so send us a tweet if you’d rather do that.
And one last bit of housekeeping, these webinars are usually only as good as your own internet connections. So if you have any trouble particularly with the audio, usually, we find that the audio by phone is much better than the computer audio. So if you don’t mind calling in, if you want to do that, there is a dedicated phone number that you can use in the email from ReadyTalk that went out about an hour today. So don’t give up on us before trying the phone if you can.
And if this is your first Bloomerang webinar, I just want to say a special welcome to you. We do these webinars just about every Thursday. We bring on a great guest for an educational session. One of our favorite things we do here at Bloomerang but our core business is offering donor management software. And if you are in the market for that or maybe just curious about Bloomerang and what we have to offer, check us out online. You can watch a quick video demo and see the software in action. You don’t even have to talk to a salesperson if you don’t want to.
So check that out after the session concludes if you want to learn more. But for now, I am really excited to introduce one of my go-to resources now for this topic. In fact, my only go-to resource, we’ve got Brock Klinger here from Harbor Compliance. Hey Brock, how’s it going?
Brock: It’s going very well. Thanks a lot, Steven.
Steven: Yeah, thanks for being here. And this is a webinar that I love doing every year because it’s such an important topic. It seems especially timely as we enter year-end fundraising. And like I said, Harbor Compliance is definitely my go-to whenever customers and partners and friends ask me about certain laws and regulations and things that I have no idea what the answer is, my first email and phone call is always the Harbor Compliance, and they respond to me. They’re really awesome and very knowledgeable.
And Brock is account manager over there, definitely an expert in all this stuff. He spends all day helping organizations figure out all these complex laws and licenses and registration requirements. So he is going to take us through basically a crash course of what nonprofits need to know to stay compliant. Very important subject, and one of my favorite things about Brock is they make it really fun and engaging. So Brock, I am going to hand it over to you to take it through it. So, take it away my friend.
Brock: All right. Thank you very much, Steven. I appreciate that. Thank you for the introduction and yes, we are going to dive right into what does it actually take to be compliant. In my role as an account manager, first and foremost, the goal is to be an educator on compliance and the various requirements facing nonprofits out there. I act as a facilitator of types for organizations that are looking to take action to become compliant and really engage with us.
We’re going to cover some of the most important information you should know if you’re looking to make your organization compliant. So in particular, the most important topics that we’re going to be handling here today include state registration requirements, online fundraising, that’s a hot topic for a lot of individuals, why compliance should be a priority, what it takes to register including the cost involved and how to manage the registration processes moving forward.
So let’s dig right in. What is charitable solicitation compliance? So, let’s break it down a little bit. Charitable solicitation is simply the act of asking for funds, okay? Compliance is following the rules that go along with asking for those funds, all right? I’ve got a quote up here. I’d like to read it to you very quickly. It’s from the IRS and it says, “Many states have laws regulating the solicitation of funds for charitable purposes. These statutes generally require organizations to register with the state agency before soliciting the state for residence for contributions providing exemption from registration for certain categories of organizations. In addition, organizations may be required to file periodic financial reports. State laws may impose additional requirements and fundraising activity involving paid solicitors and fundraising council.” Okay?
So you can see from that quote generally, charities are required to register before they start soliciting. Everything that we’re talking about here today is really based on the active soliciting. The keyword here is solicitation. If you’re asking, you probably will need to register, okay? The map to the right shows the states that require charitable solicitation registration at some point. Forty-one in blue, they are the states that actually have a registration requirement. The other 10 don’t require registration per se, but they do have a handful of other compliance requirements, namely disclosure statements for instance. Twenty-four states require disclosure statements to be included on solicitation materials, and we’ll dive into that in a bit more detail later on in the presentation.
Do these requirements apply to us? This is the big question for a lot of organizations out there. Many nonprofits, they wonder whether or not these requirements apply to the organization, and if so, which states do they need to be worried about? Chances are that an organization that fundraises will face a requirement in one form or another. Again, the requirements are based on the active soliciting regardless of whether or not any money is received.
So, it doesn’t matter if you have a check in hand or not, it’s just the idea that you are asking for it. That’s what the states are looking to regulate. It can be very simple for an individual or organization to ask for funds without having a license in place, and that’s the reason behind these registration requirements. So, the states really are concerned with whether or not you’re asking, not so much if you’re getting any money.
So methods that states generally treat a solicitation that might be surprising you include applying for grants, collecting membership dues in certain situations, and collecting donations through the organization’s website, okay? Additionally, using any professional solicitors on rating council, consultant, engaging in commercial coal ventures or CCV, they’d not only trigger the registration requirement themselves, they might even be scrutinized in more details. There might be additional licensing requirements beyond the charitable solicitation registration. Also, any for-profit entity that assists a charity with fundraising, they’ll generally need to register in some way or another as well.
Many organizations solicit using several of these methods. Anyone of which could trigger state registration requirements. And many organizations solicit more than just one state, it’s very common. Knowing where your organization is required to register means taking a close look at your solicitation activity on each of the 41 states with requirements. You’re really going to have to break it down and think about where are you actively asking for funds at this point. If you’re soliciting in any of those 41 states, you might be facing requirements to register there. It’s something you need to look into.
Okay. Moving onto online fundraising, this is a really big topic today. The internet, the rise of the donate now button, it’s really become ubiquitous. You can’t go anywhere without finding a donate now button on most websites. And since it’s readily available on your website, it can be construed as soliciting nationwide because citizens of every state can view that at the same time. This is where some of our biggest questions come from.
People ask us, if we fundraise through our website, does that mean that we have to register in every state? Or if fundraising online, if you are going to fundraise online, but you only receive donations in a few states, does that still mean we have to register in every state. Remember, we’re worried about the act of asking as opposed to receiving donations. You don’t have to feel alone, if you have these questions because we get them every day, and a big part of my job is helping people navigate this specific question.
The fact is that most charities, essentially all charities nowadays fundraise online in one form or another. A lot or organizations accept donations through their website with the donate now button and in addition, charities commonly make solicitations by email including asking for donations in their email newsletters. This is very, very common. Social media is yet another form of solicitation and it’s becoming more and more common all the time.
To give you some background on how we got to this point, going back a couple of years now, following the dot com boom in the ’90s, the internet became more mainstream. Organizations began creating a presence of themselves online. They saw it as a branding opportunity. And in addition to providing general information about what their charity is or does, the organization’s websites also serve as another means of collecting donations. They introduce software to collect donations.
As a part of that, the website meant that charities now had the ability to solicit residence in every state with a click of a button. This of course raises a lot of regulatory questions. In order to try and clear these things up. Back in 2001, NASCO or the National Association of State Charity Officials, they got together in Charleston, South Carolina to try to develop some guidelines for what an organization would need to register. And the results, they’ve come to be known as the Charleston Principles.
Some of you may have heard of these in the past. It’s a fairly common list of guidelines and they’re pretty prominent online if you do any research into this topic. Basically, what they say is that if you have a donate now button on your website, you should be required to register in a given state if you either send targeted emails to the resident of that state or receive ongoing, repeated, or substantial donation from that state. And if that sounds simple and clear cut to you, you’re most likely a lawyer, because there’s not a really clear guideline there as to how to handle your average donation that’s coming in.
These statements are inherently subjective and can be really tough to par through. And really, I don’t mean to be too concerned if it’s sounds tough to sort out because to further complicate this issue, the effort to unify state requirements wasn’t fully successful, and the guidelines are only that. They’re just guidelines. They were never codified into law. Only 19 states actually follow these rules, and they’re not bound by any law to follow them moving forward.
So, there could be special situations where a state that would typically follow the Charleston Principles could just change there and change the way they’re going to handle things moving forward. So less than half of the states that require registration actually subscribe to these beliefs, and the remaining 22 states have their own requirements and criteria for whether or not your group is registered.
Fundraising online is generally considered soliciting nationwide for the reason that donate now sections on websites, emails to newsletter subscribers and social media of course, are all solicitations that can reach to every single state. When charities receive donations as a result of those solicitations and then follow up to ask that donor to continue contributing, continue giving money to the group, that’s just furthering your charitable solicitation activities and could require a registration as well.
So, there are a couple of practical approaches that charities can use in order to maintain compliance when they fundraise online, okay. The most comprehensive way would be to register in every one of the 41 states or file an exemption, if you’re eligible for them in the states where that’s possible.
For many organizations, registering in every state is the best option so that they can fundraise nationwide by any method including online and not risk all these penalties associated without having a registration or a license in place. I can cover those risks in a bit more detail in a moment. However, we do recognize that this is a serious undertaking. This represents a serious budgetary investment and constraints on that budget are a common challenge particularly for small charities.
For these organizations, the second approach might be a better route for you. With this approach an organization registers in as many states 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 would put language on its website, alongside it’s donate now button or somewhere on its website prominently featured that it does not accept donations from states where it isn’t licensed, okay?
Ultimately, organizations have to weight a cost of registering in a state with the opportunity cost of not being able to accept donations there. This is sometimes a really simple calculus for a small organization that’s taking a look at its fundraising footprint. If you know right off the bat that you’ve never received any donation from the state west of Colorado, it’s simple to exclude those and list them on your website and saying that you will not be accepting donations.
But it can be more difficult if you’ve received donations one time or another state. Because this active solicitation is an ongoing act of asking for funds, as long as you have that donate now button up there and you’re not disclosing that you’re not accepting donations from certain states for registration requirements, you can be running [inaudible 00:14:45] of the state’s requirements. We encourage organizations to register and focus on compliance, rather than trying to fly under the radar. The penalties for noncompliance can be severe, so we strongly encourage groups to take a [inaudible 00:15:00] at compliance.
Where do we need to register? Even what you know about the requirements and when they apply, we’re going to take a look at where these types of registrations actually need to happen. First things first, you want to check to see which of the 41 states you’re soliciting in. You need to identify that solicitation footprint. You generally need to register or file an exemption in each of these states. So for those of you who are currently using a donate now button with no limitations placed on it, you’re looking at 41 states. For those of you whose organizations are sending mailers or more classic solicitations to a handful of states, then those states where asks are being made, those would be the states where you need to take a look at.
Keep in mind, you may be able to file an exemption. These are based on the type of organization, your solicitation methods and perhaps even your revenue, the amount of money that you’re bringing in on an annual basis. Ironically, most of these exemptions however, they need to be applied for and also renewed. So, you don’t get off scot free if you have an exemption. It just means that you probably won’t have to pay the state via associated with the registration. The best way to become compliant is to research thoroughly your specific registration and exemption requirement in every state that you solicit.
Even though your organization may be exempt in a state that has a revenue threshold for exemption, again, it’s generally the act of soliciting that triggers the registration requirements and not the act of receiving donations. A great way to take action towards becoming compliant is to educate your group on what solicitation means and the type of activities that trigger these requirements.
Okay. 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 it’s possible that all 41, it is going to be on your agenda. Now we realize that this can sound fairly overwhelming, and it’s definitely a significant undertaking presenting facts that people within your organization, it generally lists a few common responses, things that we’re used to hearing all the time. Things like, you know, we’ve been fundraising for years without registering and we’ve never had a problem, so why should I now start caring?
Another one we get commonly is, if these requirements have existed for so long, why are we just now hearing about them? There’s a huge cohort of the market out there that aren’t aware of the registration requirements themselves, so that’s very common. Do we need to bother complying with these requirements? What’s the worst that could happen?
Well, the requirements have been around for decades. States are becoming more and more stringent with the enforcement of these regulations. State agencies, they used to be here simply as a registration office. They just wanted you to check the box and make sure your Ts were crossed and your Is were dotted. However they now have CPAs and prosecuting attorneys on full-time staff to audit and investigate and prosecute the legal activity in the nonprofit sector, including those relative to charitable solicitation laws.
They’re doing this not only to protect the donors and their state but also the legitimate charities as well. And as you can imagine, one black spot on the nonprofit industry, I mean, it casts a broad shadow. There’s going to be a major implication therefore all the charities that are raising funds in the state, and there’s going to be heightened pressure and attention on organizations to make sure that they are filing for these licenses and doing things according to the book.
For example, California, they actually hold board members personally responsible for any penalties levied against noncompliant organizations, okay? They’re not allowed to pay those penalties out of the general fund. Instead, this comes out of their own bank account. And this is just one example, other common repercussions include state fines, [inaudible 00:19:17] financial audits, loss of state level tax exemption, and they can even revoke your right to solicit within their state, and not to mention the obvious PR nightmare that a violation like this can produce.
It’s definitely avoidable and something that you should be thinking about before diving into soliciting in a new state for the first time. One example that comes to my mind just a few years ago, when the attorney general of Ohio was holding a fundraiser for a charity and it hadn’t been registered with the state. Okay? So, again, that’s the guy who oversees every charity registration in the state of Ohio. So the when the press got a hold of that, he really caught a lot of flak from his constituents. A completely avoidable mistake and one that wouldn’t have to happen to anyone.
No doubt, the negative consequences are out there, but the organization can avoid them by taking steps towards registration. The benefit of a proactive registration approach is mainly that it generally avoids penalties rather than invite investigations for further scrutiny. So I’ve got a quote here actually from former Pennsylvania director on the Bureau of Charitable Organizations, and it’s taken from a speech that he gave to a group of nonprofits and it basically explains his take on why organizations should be proactive.
What he said was if you’re coming in, if you were coming in voluntarily, even if you had been violating the law for 10 or 15 years, you always got a pass. Bottom line is, you want to try to register voluntarily. So that’s the stance that these state bureaus are taking on this. They want to crack down on organizations who are just trying to maintain compliance with the regulations. They want to chastise groups like this who are trying to do the right thing. In the most basic sense, maintaining legal compliance is a best practice for nonprofits.
The major area of the standards of excellence, code of ethics, and accountability, fundraising and licensing compliance are important aspects of earning a lawful and responsible organization. Now we’re big believers in the fact that investing in compliance avoids headaches down the road, it’s going to allow you to run an organization more smoothly. And if you’re not registering proactively, you’re essentially inviting this issue, because there’s an inevitability to the situation. You can only get away without a license for so long. So, why not take steps to register now while your revenue is what it is currently instead of waiting until your state fees could potentially increase with increases in your revenue.
Charities, of course, they have an obligation to be compliant in every state in which they fundraise. Organizations that raise funds in every state, which generally register in all 41 states with requirements. That may represent a substantial investment of time and effort, but the upside really is tremendous here. It’s basically a license to fundraise without borders and without inhibition. Not only that, but it could result in increases in revenue.
Studies are out there that show charities that include disclosure statements which are a part of solicitation, registration to many states, I mentioned that at the beginning of the presentation. Those charities that include those statements and their solicitations actually get a better rate of return, and that’s because donors gain reassurance from the fact that organizations that they’re giving to are in fact in compliance with the law and no responsible donor wants to give to an organization that doesn’t follow the law.
At the end of the day, charitable registration requirements are law and your organization should treat these just the way you do your 990 filing requirements or your 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 costs associated with it should be budget line items. That’s a question to ask yourself, does my budget include a line item for compliance? If it doesn’t, you may need to rethink that because there are some fixed costs that will come up on an annual basis related to compliance in some form or another. You want to bring this up to your group and have a discussion about where are we missing registration that we should really have in place to maintain and run a fully compliant organization.
If your group hasn’t faced any corrective actions to this point, you want to 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 state databases of charities which donors and grant makers can easily access any time. It’s publicly available information, and more sophisticated corporate and individual donors are using these databases more and more to look up to charities they donate to.
You even got to think about the fact that we’re living in the age of GuideStar, the age of Charity Navigator. People are really, really detail oriented when it comes to researching the organizations that they give their money to. They’re trying to be responsible with the funds that they’re investing. And so these online databases make it very simple for those more sophisticated donors to identify what your current registration status is. For that reason, it only makes sense that you want to make sure you’re registered and active with the state.
So the first step towards compliance is sharing these facts with your executive leadership and ideally with your board of directors as well. Your leadership, they have a lot at stake both personally and in terms of their duties [inaudible 00:25:00] for the organization. Many board members are not fully aware of the requirements. The risk of compliance, I’m sorry, the risk of noncompliance that is, or the benefits of investing in compliance. And now that you understand these details, you want to take initiative to start the conversation with your group. You want to emphasize the importance on everyone becoming educated on the topic and advocate for prioritizing this.
Okay. So we’ve talked a lot about when the organization is required to register and where that needs to happen, but I want to talk briefly about what it takes to register what actually goes into this process, the how. The details in each state are very different, of course, but on the whole, you can think of getting registered in four phases. Research, apply, monitor, and renew. So we’ll start off with research.
This is the how-to of actually maintaining these licenses for yourself. It’s important to know your current status before filing anything whether you’re not registered, you’re fully in compliance or you’re in bad standing. Depending on the situation, you’ll have a specific implication to file a state fee, usually based on your revenue or your growth contributions, and some supplemental documents. This will be things 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 might have to foreign qualified, the nonprofit corporation and a point a registered agent with the secretary of state in order to file your fundraising registration paperwork, and knowing those requirements up front, that’s going to help you save time by avoiding rejected applications. If anyone would like a more detailed review of the types of prerequisites that might come into play, I’d be happy to provide that. Feel free to contact me after the presentation.
So one you’ve researched what’s necessary in each state, it’s time to actually apply. Each state you’ll have to complete the necessary applications accurately and compile required documents. This is going to take a line by line review of a form and its many instructions. Once you’re sure you have everything, you have to ensure proper delivery. Sending the applications to the right agency and address, it sounds pretty obvious but you might be required to file it via a specific medium.
Some states have an online filing system, whereas others will require you to submit a paper application. You need to be aware of that before you file it, and it’s even better if you can understand the various inconsistencies among state and know which types of applications are preferred by the examiners. You always want to file whichever document that the examiners are happiest to receive because that always results in the best application process as possible.
Now you may have heard of the unified registration statement. It’s commonly referred to as the URS. This document was created in an effort to streamline the application process in all states. However, not all states accept it and many require additional supplements to be included. The URS filing itself, it’s for those of you are familiar with it, it’s actually longer and more complex than regular state forms, and this is one of those forms that state examiners do not prefer over their own documents. They’ll take longer to approve the URS because of all those additional application materials being attached.
Okay. So now for the question that you’re probably all asking, what does this all cost? What can I expect to spend in order to register and get these licenses? So, as you might suspect, this answer depends on the organization. It depends on the annual revenue and also the number of states that you’re registering in. But we can give you some broad answers in general terms to give you a better sense of what your cost will look like.
So if you were to register in 41 states, and I will be talking in aggregates here because it’s the simplest thing to do. It may not apply to every organization, but this will give you a better idea of what your max cost is. Total state fees per nationwide registration project will fall somewhere between $1,400 and $5,000 annually for most organizations.
So, keep in mind that this is an estimate of the total fees if you are registered everywhere. Don’t confuse that with the per state cost. In fact, a single state registration fee is usually very reasonable. It’s $25, $50, maybe $100. In many cases, it’s nothing at all. So, since many of you might not have to register with every state, that should be reassuring, it’s really not that expensive to apply in most states.
But just to give you a rough idea of how this works in terms of what your revenue level is, organizations that bring in $100,000 in gross revenue annually, they’ll generally be on the lower end of that $1,400 to $5,000 range. As you approach the half million dollar mark in annual revenue, you’ll probably fall somewhere in the middle. And the organizations over a million gross revenue, they’re probably looking at the higher end of the fees to register nationwide. And you’d only see a marked increase in registration costs once you hit about $100 million in revenue. So that’s a long way off for most organizations out there. And the change at that point, it’s really not that big of a difference. It jumps about $1,000 once you hit $100 million in revenue.
Once your applications are submitted, you then have to monitor those registration statuses and see them through to approval. This can be a waiting game. Some states takes a couple of weeks to process your application, but in others, you could be waiting 6, 8, 10 months, it really just depends. During that time, you’ll be busy ensuring that they were received, are being processed properly, they weren’t rejected, your state fee check was cashed. And then even bigger challenge will be resubmitting rejected applications if that happens, and dealing with state errors, and also creating a system for tracking all the registration information and renewal dates moving forward is going to be very important for you.
The good news about these slow processing times however is that generally, when you submit an application, you’ll have something on the books with the state, we have not seen states take corrective action against organizations once they have an application pending. So if you’re feeling right now on the call that you need to get started immediately, this is going to be very time consuming and we have to be fundraising broadly, don’t worry too much, because as soon as you submit those applications, while it may not be expressed approval to begin soliciting nationwide without risk, we have not seen any issues result from that. They want to see you being proactive, and that’s a good thing to get started quickly.
Many of you already understand how much of a time commitment tracking all of this can be, and for those of you who haven’t personally done these registrations, you can expect to spend hours researching, identifying the proper forms, and submitting these applications to the state. You’ll have weekly, if not daily cash managing the filings, and tracking application acceptance and renewals without some sort of technology behind the scenes to automate this to be really difficult. So of course, it’s always an executive. It’s almost always an executive or a high-level staff person that has to take care of this all. And generally, you can find better uses for their time.
The time to completion of an initial registration can be anywhere between 2 weeks and 10 months. Some of its variation from state to state and what the state processing time are, but through efficient management of the process. Meaning, sending in the right applications that are fully complete, you can ensure that those processing times are kept as low as possible. States will also require you to renew the registrations. Most states have annual renewal periods, but there are one or two, D.C. and Georgia that renew biannually. Tracking renewal dates and making sure that they’re filed on time is extremely important.
So, with that in mind, I want to move on to managing compliance on an annual basis. But moving forward, you want to begin to identify the states in which an organization is required to register and come up with a plan to become compliant.
What does it take to manage compliance? Just like with initial registrations, you’ll again prepare a state renewal application, determine the appropriate state fee, which is usually based on your revenue once again and compile those supporting documents. The difference between the initial and renewal filings however is that, the renewal has a hard and fast deadline. There’s a time that this actually needs to be submitted by, so you’re against the clock now. States usually assess penalties if you miss a deadline. So again, really important, stay on top of these, don’t be late.
As the organization becomes registered to solicit, it’s important to keep excellent records of license numbers, registration dates, and due dates. You need to have a good system in place. You need to track this information as accurately as possible because it’s going to be very important to the longevity of maintaining these registrations and keeping them in good standing. Many of our clients have some combination of an Excel spreadsheet, I’m sorry, I should say, they had some combination of an Excel spreadsheet and calendar system for reminders. We find that that’s not always helpful in tracking changes and state requirements and then monitoring extensions, is it time to file.
So, some more sophisticated [inaudible 00:35:06] where it’s generally suggested. I do want to mention those extensions briefly. So, if your 990 and financial data aren’t ready before a state deadline, then you have to file a request for more time to file and renew these charitable registrations. It’s a similar concept to the 8868 extension that you file with the IRS if you’re a 990. But in each state, the process is of course, different. Filing extensions will give you much needed relief while you’re waiting for that 990 year audit so it’s really important that you maintain to stay in good standing, but it is a whole new layer of filings, as you can imagine. In all the states where you’re filing extensions, you’ve got one more piece of paperwork to handle there.
Finally, getting back to the disclosure statement item that I mentioned before. About 24 states require you to include those on your solicitation materials. The idea behind them is to inform donors of where they can find more information on your charity’s leadership, finances, and activities. These statements should be listed on appeal letters, on websites, and other places where your solicitations are being made. And just like everything else, disclosure statements also change. So it’s important that you stay informed of the changes and update your solicitations accordingly.
For those of you who are registered in Florida, you probably got an email this past spring mentioning that they’ve changed their disclose statement and that your statement should be updated accordingly. If they were nice enough to let you know, I would not give the benefit of the doubt to many other states. It’s not common. Florida is very proactive in keeping people up-to-date on changes to their rules, not everyone does that.
Managing compliance will eventually become second nature to you. It’s just like filing a 990 each year. But you can still expect to spend a lot of time preparing and tracking renewals. You also need to stay abreast of any legislative changes. At any time, reporting requirements and due dates can change. States add and remove registration requirements all the time. Sometimes they’re nice enough to tell you, most of the time if they generally aren’t.
Okay. So we’ve talked through the various complexities involved in managing charitable solicitation registration and the renewals of those registrations, and hopefully at this point, we’ve got across the point the importance of charitable solicitation registration and why you should be prioritizing this. If you know your organization isn’t registered in all the states that it should be, and you’re not under any sort of government inquiry, they’ll be knocking on your door. 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 press the issue for organizations that are registering in good faith. And the best outcomes can always be achieved through being proactive. All in all, charitable solicitation registration across the 41 states, it can demand hundreds of hours from a qualified individual both initially and ongoing. We’re talking about a substantial drain on [inaudible 00:38:16] time, and that’s exactly why we’re here.
And I just want to take you through what our solution looks like and how we help people manage these things. We fully take on every step of the process from the research to prepping the applications, cutting the safety checks and compiling and mailing out the packages. We’ll do all the necessary follow-up with the states, monitor those approvals, and load all of this information into our proprietary software and then send the approvals to you as they arrive. It reduces every bit of the administrative work on your part.
Moving forward, our software, it tracks all of the information for you. You don’t have to lift a finger on the renewal applications and we’ll take care of that all for you. Really, all that’s required of you is you send us a copy of your 990 and your financial data on an annual basis so that we can prep those applications for you. To be clear and just to make sure you understand how the software works, the idea behind it is it’s there for reporting purposes. The customers facing side of the software allows you to generate reports on your current registration statuses. It does not complete the applications for you, okay?
We’ve found through various iteration to this process, there’s no software out there that’s sophisticated enough to handle all the different inconsistencies between states and changes to the state forms so on and so forth. Instead, our specialists actual prepare these applications by hand in-house for you.
Our client portal will allow you to add as many users as you’d like to your account at no additional fee. So your leadership staff members, your outside council and accounting teams, they can all access the software. And you can see a screenshot there on the bottom left corner of the screen of what a small piece of the software looks like. And we’d be happy to schedule the demo of the system with anyone so you can walk through and get a better feel for how it all works.
So all in all, our approach to charitable solicitation compliance is to provide full service management at a flat rate per state based totally on volume. We’ll go for services on an annual fiscal year, or I’m sorry on a fiscal year basis and don’t use any [inaudible 00:40:23]. You have to take full advantage of our team of experts to manage the process for you, and again, limit the time on your end, to simply facilitating the signatures and sending the 990.
And so that about wraps it up. I believe Steven is going to help me out here and facilitate the Q&A.
Steven: Yeah. We’ve got a lot of questions. There’s lots of interesting scenarios and perhaps exceptions here that people are dealing with. So we do have about probably 12 or 15 minutes for questions. So if you haven’t asked a question, please feel free. We’ve got some time now. Obviously, Brock is a wealth of knowledge for all these issues. But thanks, Brock, I should say real quick before we get into that. Thanks for being here and sharing all this great info with us. It seems pretty scary. It seems like they don’t really make it too easy on nonprofits, do they?
Brock: No, it’s a pretty complex problem that we’re left to deal with here, but it’s not the perfect scenario. And there’s a lot of hope out there that the rules will change in the future. But for the time being, this is the situation we’re given and we need to adapt to it and adjust accordingly.
Steven: Yeah. Well, I’m going to combine maybe two or three questions. There’s more than a few people here, Brock, asking about, you know, getting your tax number, your EIN, that is not the same as registering, right? Or did I get that wrong?
Brock: No, you’re right. That’s a totally separate number. That EIN is often used in your receipt, you know, your charitable receipt process when accepting a gift. That is a federal level number, the IRS gives you to identify you as a taxpayer. And its involved in the fundraising process and often a part of the day-to-day for development teams. That would be a separate registration that’s done at a federal level not having much to do with the charitable solicitation registration requirement.
Steven: Okay. Good. Thanks for pointing that out because a couple people did ask. Here’s one from Patricia, a pretty interesting situation. Patricia has a long-term donor that recently moved out of the state that they’re registered in. Does Patricia have to register in the state that that donor moved to, or do they have to do anything there for that existing donor to keep soliciting to them?
Brock: Yeah. That’s a great question, and actually it has some broader implications and I think I’ll tie it back to some other examples I’ve seen. So when you have this issue of migrating donors, really what the states are looking for is protection of their own citizens. So, if that person has moved permanently to a new state, and they are continuing to give funds to your organization, again, it’s the active soliciting. So if you’re asking this person on a repeat basis for funds in the state where they now reside, that’s where you need to have a license in place.
So one item that comes up pretty frequently is the idea of snowbirds. People who move to Florida for a part of the year. If they’re not a full-fledged citizen of Florida, maybe it’s not such a big deal. But that being said, if you are pairing these traditional methods of solicitation with the online solicitation, the donate now button, you are going to be triggering those registration requirements in Florida. And if you follow-up the donations that are made online or, you know, just continue contacting the individuals while they reside in Florida, then you would have a registration requirement to contend with there.
Steven: Okay. That makes sense. Similar question from Marigo. Marigo if I’m mispronouncing your name, I’m so sorry. But it sounds like they’re doing online solicitations and I think they are a community foundation. Do they have to do anything specific with donors at a state who are donating to a specific fund? So, they’re soliciting most of their time in the state that they’re in, but is the answer the same for those people who may be out of state but are donating to that one organization?
Brock: Yeah, absolutely. Again, yeah, it’s the active solicitation that matters once again. I mean, that’s the catchall. So, if you’re asking for funds on a broad scale and people in other states are able to see those asks being made, then you’ll have a registration requirement to deal with.
Steven: Okay. Good. So Brock, you mentioned organizations like Charity Navigator, GuideStar, even organizations who issue grants. Are those watchdog organizations specifically, do you know if they actively are monitoring whether or not someone is registered? I know that a lot goes into, like, the profile of your organization on those sites and how many stars you have and all those good things. Does state registration factor into those grading systems? Are you aware of how they kind of take some of this information and filter it into their scores of nonprofits?
Brock: That’s a great question. To this point, we’ve not seen an integration there. There’s no publicly available data on those websites on whether or not the registrations are enforced. With that being said, just about every state. You know, there might be one or two who don’t have a publicly available resource for searching all of the registered charities in their state. So, if you can’t find it on GuideStar or on Charity Navigator, you will be able to find it someplace else.
Steven: Okay. Great. We’ve got a lot of them coming in here. So I’m just going to kind of roll through some interesting ones. What about those granting organizations? Obviously, a lot of the grants that we get as fundraisers don’t necessarily come from the state that we’re in. So is going after a grant the same as soliciting? And if they’re out of state, do we have to register in the state that perhaps that foundation or granting organization is based?
Brock: Yeah, yeah. You can ask, you know, you can look at there’s a lot of the same ways you would with a classic solicitation. Grant writing, writing an application to apply for a grant, that is an active solicitation. You’re asking for funds from an organization that maybe located in another state. If that organization resides in a state with a registration requirement, you usually have to have that registration in place.
And the immediate follow-on question to this that I typically get is, “Okay. So if my grant making organization is located in D.C. but the check is sent from their bank in Minneapolis, Minnesota, which state do I need to register in?” It’s where the solicitation is made. It’s where you’re sending the application. That’s generally the state that you need to have some sort of filing on the books with.
Steven: Okay. What about federal grants? Pamela here is asking if you need to be registered it in, I guess it would be D.C. to apply for a federal grant, is that how that works?
Brock: Yeah. So D.C. is one of those states out there that actually has a registration requirement. It would be advisable to have some sort of registration on the books there because you’d be soliciting a citizen of that territory for the actual donation.
Steven: What about memorial gifts? So let’s say a bereaved family, a couple of people are asking about this. They select your organization for those memorial gift. So you go to a funeral or a viewing and that’s the charity that’s been chosen for gifts in memorial. Is it still, is the owner from the nonprofit to register in a state where, I guess, where the funeral or viewing is happening?
Brock: So I think I can rectify this and clarify just by saying once again, it is the act of asking that matters. There is such a thing within unsolicited donation. It’s possible to have money given to you without truly having asked for it, if it was passed along by word of mouth or if you have an uncle who passes on and he recognize that you are a strong supporter of a particular organization and he wants to be mortalized and have some of that money given to the organization you’re involved with, that’s not necessarily a solicitation because you didn’t reach out to him and hit him up for money per se. But if there is ongoing solicitations of the family after the event, then there could be a requirement for registration in that case.
Steven: Okay. It makes sense. So that third party, if they’re asking on your behalf, it’s not the same as you asking necessarily.
Brock: That’s right.
Steven: Cool. What about associations? Do associations have to do the same type of thing for members? So maybe they’re soliciting like a member renewal? Is that under the same classification or is that covered separately?
Brock: Yeah, membership dues actually do have registration requirements of their own in some states. There’s a potential out there for exemptions due to . . . because the organization is a membership based group. It falls under that category of it just depends. They will count it as an active solicitation whereas others will not. It does take a state by state review to identify where registration requirements are going to come into play. That being said, we work with a lot of membership organizations and their registrations come in fairly broadly.
Steven: Okay. Great. So we’ve had a couple of questions about international. So organizations are U.S. space but they are soliciting gifts internationally, is that a whole other webinar topic perhaps or could you give us maybe a quick crash course on that?
Brock: Yeah, yeah, that might be another webinar another time. The focus of this presentation is really state level charitable solicitation registration. I’m aware of and I’ve heard of international solicitation registrations, but it’s interesting because generally you would need to have some nexus in order to fall under the registration requirements of a foreign government.
Obviously, all of these organizations on the webinar today are probably formed in the United States and under [inaudible 00:50:59] down by the IRS and governed by the states. You would need to have some sort of legal standing in the country in which those other registrations would exist. So, there might be some dual qualified organizations out there. They are less common, but yeah, that’s probably a talk for another presentation.
Steven: Yeah. I figured you might say that. A couple people have asked that rather than registering in every state, this is an organization, specifically I’m looking at Lynn’s question. They’re pretty unlikely to receive donations from out of state. They don’t solicit there. Perhaps, is it a best practice to put something on your donation page saying that we only accept donations from our own state? That seems like maybe being a little conservative and careful, but have you seen organizations doing something like that? It seems like you probably just rather them go ahead and register rather than putting something up that might cut down on donations?
Brock: That is really your call. I fully recognize that to a group of nonprofit organizations involved in fundraising and development that limiting donations, just the very idea is like heresy. But you would be [inaudible 00:52:20] your risk by putting that disclosure on the website. And if you are truly a local organization that serves a very specific community and doesn’t really solicit funds outside of it, then, you know, you’re probably not going to see a big change in the revenue that you’re bringing in. So what does it hurt to put up that disclaimer?
If you can afford the registration in another state and that’s feasible for you, then that’s a great way to continue having that opportunity to bring in money from another location. But if in the scheme of things, it’s not a high likelihood item then maybe it’s worth it just to disclose that you won’t accept it from elsewhere.
Steven: Okay. What about matching gifts? Does that fall under the same category as perhaps some memorial gifts that is not necessarily generated by you, but Benjamin here had a specific example where, had a donor, that donor’s employer was willing to match the gift. But the employer is perhaps national headquarters or whatever, was out of state, is that something that you would need to register in the state of that company offering the matching gift? Or does that fall under sort of an unsolicited gift that you just happen to get?
Brock: So that’s a good question. And what that brings to mind for me is a commercial co-venture. So, that would be an arrangement that I’m sure all of you are familiar with without even knowing it if you’ve had a run in at a grocery store or where the individual at the checkout counter suggested, you know, would you like to donate a certain amount to this cause, we’re matching it, or there’s a certain featured product that the proceeds from that product are going to be donated to a certain charity. That is a commercial co-venture arrangement. And this sounds like that same sort of thing.
A charitable registration requirement would be in play for the charity that’s involved with the employer organization. It’s very likely they have a contract in the books and where that states that if our employees will give a certain amount to this charity, we will match that donation. And if that contract does exist, then they likely have not only a charitable registration in the state where it exists but also commercial co-venture registration in place for the for-profit employer.
Steven: Okay. Wow, these scenarios can get pretty complicated.
Brock: [inaudible 00:54:45].
Steven: Wow. Well, it seems like we’ve gotten through a majority of the questions. I know we’re kind of pushing up against the hour here and I don’t want to keep anyone from their lunch perhaps if they haven’t. So Brock, any kind of final advice for people? How can they get a hold of you? Obviously, you’re a wealth of information, so, is it okay to take maybe more questions offline or by email?
Brock: Yeah. I’d encourage anyone that has further questions to contact me directly. That is my email address up on the screen there. I’d be happy to field any further questions and really just engage in the dialog, and that is a resource for you moving forward. I’d be happy to tagline questions you may still have.
Steven: Cool. Yeah, check him out. Definitely an important topic and we’ve got year end fundraising coming up, so it might be something you might want to look into. But Brock, this is really awesome to have you. I really love that you just kind of break it down into nice bite sized chunks for us. So, thanks for being here for an hour.
Brock: Absolutely. I’m glad to do it. Thank you so much, Steven.
Steven: And thanks to all of you for hanging out with us for an hour or so today. I know it’s a busy time of year. You probably got a lot of year end stuff and some events happening perhaps, so thanks for taking the time out of your day to join us. Definitely do reach out to Brock and check out their website. There’s lots of good resources there as well. We’ve got some resources on our website as well, lots of downloadables that you can check out.
One thing we’re really excited about over here at Bloomerang is BloomCon which is our upcoming annual conference, we’re going to be in Phoenix, Arizona in February, which is just a few months away. We’ve got some great speakers lined up. We’ve got [inaudible 00:56:18] and others joining us there. It’s a one-day all plenary session conference, very affordable. Check it out, just go to our website, bloomerang.co/bloomcon. We even got a second BloomCon this year in Baltimore in May, so if you can’t make it to Phoenix, if you’re perhaps an East Coaster, save the date for that one. You’ll see all the information on our webpage as well.
We’ve got some great webinars coming up here in the near future. We are doing a special doubleheader webinar one week from today. It’s the first time we’ve ever done this but we’ve got two really awesome sessions coming up from two of our favorites, Marc Pitman and Claire Axelrad are going to join us. Marc is going to talk about goal setting within your organization especially interdepartmentally. It’s going to be a really good session. And then Claire is going to talk about fundraising appeals. So if you haven’t finished your year-end appeal, haven’t gotten that out the door and have some time to maybe tweak or hone that, definitely attend that webinar. 1 p.m. with Marc and 3 p.m. with Claire, all Eastern time. Totally free, going to be great. Register for one or both of them. We’d love to see you there.
And we’ve got some other webinars throughout the end of the year on our webinar page if neither of those works for you, but we would love to see you one week from today. But if not, look for that email from me later on this afternoon. I will be sending out the slides and the recording of this session. You can reference it all year long. If some weird scenario comes up that you didn’t think of that we didn’t talk about today, be sure to reach out to Brock, he’ll set it straight for you. But look for that email and we’ll send you all those goodies. So, we’ll call it a day there. Have a good rest of your Thursday. Have a fun and safe weekend, and we will hopefully talk to you next week. Bye now.