Your shiny new website is up and running. And, like most tax-exempt nonprofit organizations, your website prominently displays a “donate here” button. What better way to solicit charitable donations from American philanthropists! The problem is, your organization may now be “soliciting” donations from the residents of every state in the United States. You’ve probably heard or have a vague notion about charitable solicitation registration laws, and the question is: do you need to register your charity in every state in the Union?
The answer is no, you will not need to register in every state, but this overlooked and misunderstood regulatory scheme can lead to significant penalties if you don’t take a deliberate approach to registration. Luckily, there are some great resources (this blog post included!) to help guide you through the regulatory quagmire.
The Regulatory Landscape
Charitable registration law is challenging because every state has a unique regulatory scheme and this is a rapidly changing area. Indeed, the law in all areas is rapidly evolving to keep up with the internet and the challenge of human interactions over web. Accordingly, this blog post is not intended to capture all the legal nuances in this area—the fees and regulations may have changed by the time you read this! So please use this post as a resource and a starting point, but do not substitute this post for your own investigations or case-specific legal counsel.
To date, 39 states (plus the District of Columbia) have registration statutes. These statutes have wide-ranging requirements for registration, exemption, and even fees. For example, the cost of registration in California is $25 (and between $0 to $300, depending on annual revenue, for an annual renewal) and in the District of Columbia the cost of registration is $412.50 (and $412.50 to renew, required every two years).
In addition, each state has a separate body of case law interpreting whether a “donate here” button or online campaign is enough of a “nexus” or “presence” within a particular state to trigger that state’s registration requirements. For example, New York and Pennsylvania case law and regulators have affirmatively stated that a “donate here” button is enough of a nexus to trigger those state’s registration laws. And, although I have not found the legal authority on point, I’ve heard and read, from trustworthy sources, that Florida and New Jersey regulators also consider that a “donate here” button triggers registration.
Internet Uniformity . . . Mostly
As I mentioned above, if you have a “donate here” button on your website that anyone can see and send donations to, then you are arguably “soliciting donations” from residents in every state. The underlying legal question is a thorny constitutional issue of states’ rights and personal jurisdiction. In a nutshell, the question hinges on activity within a state. For example, an online-based retailer with a brick-and-mortar storefront in California who ships products to consumers in Washington State is active in Washington State and subject to its laws. After all, the retail products are physically landing in Washington State. But the “donate here” button is a more difficult situation because the charity is not actively placing something physical into foreign states. Some vehemently consider regulation of “passive online charitable solicitations” (a “donate here button”) as unconstitutional, and the province of the federal government to regulate (if there is to be any regulation in this respect at all).
In an attempt to provide clarity on this issue, and because it would be absurd to require small nonprofits to register in every state if they use online solicitations, the National Association of State Charity Officials (NASCO) came up with internet registration guidelines known as the “Charleston Principles.” Under the Charleston Principles, registration in a foreign state is only required for the “donate here” style of solicitation if:
- It’s non-Internet activities alone would be sufficient to require registration; or
- The entity solicits contributions through an interactive website; and
Either the entity:
- a. Specifically targets persons physically located in the state for solicitation; or
- b. Receives contributions from the state on a repeated and ongoing basis or a substantial basis through its website.
If the above seems unclear to you, you’re right. The guidelines are not meant to create an exact scientific measurement for when registration is required. Nevertheless, using the guidelines we can distill a few important examples. First, let’s say that a single donor from California donates to your Washington State based nonprofit through your website, you probably don’t need to register in California. But let’s say that the donation was for $25,000, which represents about 20% of your organizations revenue. Now you should register because that probably constitutes a “significant basis.” Second, let’s assume the same situation, but instead the donor gives $25 and provides their email address. You will need to register in California if you then send that donor an email soliciting further donations. Your organization is now targeting California persons.
Keep in mind that the NASCO guidelines are not legally binding state law. Indeed, as mentioned above, New York and Pennsylvania have established rules whereby if the mere presence of a “donate here” button triggers registration in those states. Still, many state charity officials participate in NASCO, and their agencies will honor the above requirements.
The Unified Registration Statement—More Uniformity . . . Mostly
In addition to the Charleston Principles, NASCO and the National Association of Attorneys General collaborated to create a unified registration statement (the “URS”) for nonprofits to register in multiple states. The URS and more information about it can be accessed at: http://www.multistatefiling.org.
The URS is incredibly helpful if your organization is soliciting in many states, but it is not a blanket solution. To begin with, only 31 jurisdictions currently accept the URS. In addition, roughly 15 states require additional information or filings before accepting the URS. So if you need to register in only a couple of states, I would simply use those state forms.
4 Tips on Registering
So how do you put it all together and choose where to register if you’re using the “donate here” button? The answer: make an affirmative solicitation plan. Take the time to think about the people who are most likely to donate to your organization, and where they reside. Or, think about the states with the biggest populations (New York, California, Texas, Illinois) and consider registering in those states. Finally, remember that there are 11 states that do not require registration.
In addition to thinking through your own plan of action, I have the following tips:
1. Register in your state of domicile. This is a requirement of the Charleston Principles, but it’s also a no-brainer. Register where your nonprofit is formed and where your primary operations are.
2. Register in or exclude New York, New Jersey, Pennsylvania, and Florida. Just having the “donate here” button risks regulation by those states. I would register in these states (because they have large populations). If you still don’t want to register, refuse donations from those states and use the following disclaimer to try to insulate your organization from liability:
We will not accept donations from residents of the following states:
- New York
- New Jersey
3. Use the URS, or don’t. Remember that the URS is an excellent option for tackling many jurisdictions at once. But also keep in mind that the URS is longer than many state forms that will accept the URS, and many states require additional information anyway. So if you’re registering in a handful of states, it’s probably best to use those states’ forms.
4. Call the regulatory agency to ask questions. If you’re unsure about an exemption, whether you’ve trigger registration laws, or if you need help filling out a form, I would call the governing agency. I’ve found that, in general, the state agencies and their employees regulating charitable solicitation laws are extremely helpful. Even though an agency can’t give you “legal advice,” and even though I’ve known the advice they provide to be wrong, you can get a lot of free information by simply calling and asking.
The article provided above is for general information purposes only and should not be relied on as specific legal advice. This article does not form an attorney-client relationship. If you have any questions about this article, please feel free to contact Peter J. Smith at email@example.com