It may come as no surprise to hear that fundraising activities are regulated by state law, but did you also realize that nonprofit organizations engaged in fundraising activities are required to file a registration form within the state where donations are being solicited?
A majority of states require “charitable solicitation registration”, meaning registration in advance of engaging in any fundraising or solicitation activity. Local nonprofits should note that the state of Vermont does require some form of charitable fundraising registration. In many states there is also a registration requirement when either another nonprofit or a for-profit entity agrees to share the profits from sales with a charitable nonprofit. Failure to register in these states can lead to fines and, in some states, even criminal penalties.
No matter what vehicle your nonprofit is using for fundraising (Twitter, texting, phone calls, snail mail, or personal “asks”) if the underlying activity is solicitation – defined as asking for a donation – that’s regulated activity in most states.
Following are some resources for nonprofits to help navigate the obligations that charitable nonprofit organizations have to raise funds legally:
- Stay up-to-date on what forms and filings are required by visiting the websites of the regulatory authority in your state. Some states require nonprofits to file supplemental forms in addition to the primary registration form. Vermont’s charity official is:
Office of the Attorney General
109 State Street
Consumer Protection Unit
Montpelier, VT 05609
Email: [email protected] 802-828-3171
- Determine the best person to assign the responsibility of filling out your nonprofit’s charitable registration forms. The accountant/CPA who prepares your IRS 990 can also prepare and submit state charitable registration forms, since the two forms share much of the same information.
Be aware that filing fees plus labor for preparation of the forms can be very costly for nonprofits seeking to file charitable registration forms in all the states where registration is required.
In addition to the required registration, many state also require “disclosure statements” that alert potential donors that the nonprofit is registered in the state. The disclosure statements must be included in solicitation materials, such as annual appeal letters and letters confirming pledges.
Many states require not only initial registration but ongoing registrations in subsequent years. Late fees apply, so be sure to note renewal deadlines.
If your nonprofit will no longer be soliciting in a state where it had previously registered there may be special filing forms required to “unregister” in that state.
Games of chance may also require registrations. Your state may, or may not, permit charitable nonprofits to conduct raffles, Bingo, auctions, and other games of chance. If it does, it’s likely your nonprofit will need to apply for a license from the state beforehand. One major issue that games of chance raise for charitable nonprofits is that “income from games of chance may be considered unrelated business income and therefore the charitable nonprofit may owe tax on the income, and winners may owe tax that the nonprofit is required to withhold.” Games of chance may also trigger the conduction of background checks and a review of employment laws in the state. (https://www.councilofnonprofits.org/tools-resources/games-of-chance-raffles-and-charity-auctions).
We understand that the list of forms, fees & filings can seem daunting. Failing to file the necessary forms, missing deadlines or missing payments can cause significant damage to your company. Off-setting these processes to a professional is the safest way to ensure their accurate and timely completion. For questions and more information please contact one of our offices in Rutland, Vermont (802)775-7132 or Williston, Vermont (802)878-1963 or email [email protected].