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Charitable Solicitation Regulation for the Nonprofit Sector: Paving the Regulatory Landscape for Future Success
Executive Summary
by Jamie Usry
Untitled Document
Hundreds of billions of dollars
in private charitable contributions
filter to 501(c)(3) public
charities each year. The GivingUSA
Foundation reports $260.28
billion in total charitable
giving in 2005 and an even
more impressive $295.02 billion
in 2006. Of these donations,
individuals gave 75-76%, or
$199.07 billion in 2005 and
$222.89 billion in 2006.[1] Unfortunately,
according to the Federal Trade
Commission, 1% of all charitable
giving is misused or collected
using fraudulent means.[2] By
FTC estimates, in 2005 and
2006 $2.6 to $3 billion of
total charitable donations
were not spent as the donor
expected, or were received
using fraudulent practices.
In light of these statistics,
the need for regulatory mechanisms
should be clear. Such mechanisms
are necessary to deter the
misuse of funds, to protect
organizations and the sector
from legitimacy threats and
negative public opinions,
to hold organizations accountable,
to ensure professional ethics,
and to protect the public
interest.
Although the Federal Trade
Commission is the federal
government’s primary consumer
protection agency, state governments
have assumed the role of oversight
of charities through registration
and reporting. State regulations
on charitable giving are codified
in a variety of Charitable
Solicitation Acts. In states
where such laws have been
enacted, the office of Attorney
General typically assumes
the responsibility for registration,
reporting and enforcement
of charitable giving.[3] These
laws vary regarding what information
charitable organizations are
required to submit with their
registration applications
and annual reports. Some of
the various categories of
requirements include: IRS
501(c)(3) determination letters,
fundraising contracts, bylaws,
IRS 990 forms, audit paperwork,
notarized signatures, and
fees. Further, every state
maintains a different fee
structure for initial and
recurring registration and
reporting costs.[4]
Currently, there are only
nine states that have no statutory
regulations in place for 501(c)(3)
organizations that solicit
private donations in their
borders. At the far end of
the spectrum are Delaware,
Wyoming, Iowa, Idaho, Nevada,
and Nebraska, which have no
registration or reporting
requirements contained in
their various nonprofit sector
statutes.[5] The
three remaining states in
this group (Indiana, Vermont,
and South Dakota) have each
enacted a form of charitable
solicitation statutes for
professional fundraisers and
consultants, but these laws
do not govern 501(c)(3) nonprofit
organizations.[6]
In 1998, the National Association
of Attorneys General (NAAG)
and the National Association
of State Charity Officials
(NASCO) released the Unified
Registration Statement (URS)
under their concerted effort,
known as the Multi-state Filer
Project. The URS is an effort
to consolidate the information
and data requirements of all
states requiring registration
and reporting for charitable
organizations. In other words,
the URS format is a compilation
of the information required
by most states. It is intended
to “standardize, simplify,
and economize compliance under
the states' solicitation laws.”[7] The
URS is an alternative to the
state specific forms and requirements.
It is comprised of a three
page application with instructions
that can be downloaded online
at http://www.multistatefiling.org/c_statement.htm by
all nonprofit organizations.
The form requires basic information,
such as federal tax ID number
(EIN), state business ID number,
IRS 501(c)(3) determination,
incorporation information,
organization name and contact
information, board member
names and titles, and current
fiscal figures.
Of course, because all state
governments still have regulatory
authority over nonprofits
physically present in their
state and those soliciting
donations in their state,
state legislators may or may
not choose to accept the URS
as an alternative to their
current forms. Currently,
thirty-five states, including
Utah, and the District of
Columbia accept the URS as
a method of registration.
This means that only three
states that require registration
and reporting do not currently
accept the URS: Oklahoma,
Florida, and Colorado. All
thirty-five states and the
District of Columbia require
some sort of supplemental
application form or supplemental
documents with the URS application:
97% require the previous year’s
Form 990; 86% require a copy
of the IRS determination letter;
69% require a copy of the
certificate of incorporation;
and 64% require the previous
year’s financial audit documents.[8]
In Utah, a supplemental application
form and some additional documents,
such as the articles of incorporation,
bylaws, form 990 and IRS determination
letter, must accompany the
URS. Despite these additional
requirements, 501(c)(3) public
charities soliciting funds
in multiple states will find
the ability to complete and
reuse only one URS
application as a significant
benefit for multi-state registering.
The issue of multi-state registration
and reporting has become increasingly
important for the nonprofit
sector in our Internet based
world. Before the Internet,
only organizations with very
large budgets could afford
to launch fundraising campaigns
extending outside of their
local jurisdictions or outside
of their own states. Consequently,
small organizations rarely
had to deal with the process
of multi-state registration.
However, Internet and e-mail
fundraising have become increasingly
economical and effective strategies
for small charities to solicit
more effectively from a larger
population of people. As a
result, for the first time
ever, many small organizations
must complete numerous state
applications—resulting in
increased man hours and administrative
costs that can be prohibitively
expensive.[9] Of
course, at the same time,
increasing numbers of registering
charities also means a significantly
larger workload for state
charity officials to process.
Even more troublesome is the
fact that “the Internet transcends
local, national, and international
borders, thus making jurisdiction
impossible to establish.”[10] Indeed,
there has been a general lack
of consensus among state charity
officials and the nonprofit
community regarding the application
of existing state charitable
solicitation statutes to the
borderless Internet. In1996,
in United States v. Thomas,[11] the
Court found that the Internet
is a means of interstate commerce
and that the transmittal of
any data via the Internet
constitutes contact between
two states. With regards to
Internet fundraising by 501(c)(3)
charitable organizations,
the implications of Thomas are
clear: “where users download
Web pages residing in foreign
jurisdictions…will constitute
sufficient contact to subject
the organization to the jurisdiction
of the foreign state or states
and therefore to the foreign
charitable solicitation regime.”[12]
Following the Thomas decision,
NASCO and NAAG published “The
Charleston Principles: Guidelines
on Charitable Solicitations
Using the Internet” in 2001.
In general, the Principles
state, “An entity that is
domiciled within a state and
uses the Internet to conduct
charitable solicitations in
that state must register in
that state.”[13] If
an organization actively solicits
via an Internet website to
residents of a certain state,
or if the organization receives
contributions within the state
“on a repeated and ongoing
basis,” then it must register
within that state.[14] State
charity officials must quantify
for themselves what they will
consider “repeated and ongoing”
in terms of the actual number
of contributors and the total
dollar amount of contributions
received in a fiscal year.
Furthermore, e-mail solicitations
will be treated the same as
mail or telephone solicitations,
and registration will be required
when a state’s residents are
solicited via e-mail.[15] Also,
organizations that invite
further “offline” activity
to residents of a certain
state via a website must register
within that state. [16]
Following Thomas, nonprofit
organizations and the fundraisers
that they employ should assume
that state statutes do apply
to Internet and e-mail fundraising.
For a detailed analysis of
best practices and recommendations
for the nonprofit sector, access
the full report here.
Note: Ms. Usry is an MPA student
at the University of Utah
specializing in the nonprofit
sector. This executive summary
is based upon her Major Research
Paper (MRP) that was written
for her MPA degree in correlation
with the class Developing
Fundraising/Revenue taught
by Scott Mietchen. Ms. Usry
will complete the MPA program
in Spring 2009.
Table
1:
|
State
Officials Responsible
for Charitable Solicitation
Laws
|
Alabama
|
Attorney
General
|
Alaska
|
Attorney
General
|
Arizona
|
Sec.
of State; Attorney General
|
Arkansas
|
Attorney
General
|
California
|
Attorney
General
|
Colorado
|
Sec.
of State
|
Connecticut
|
Dept.
of Consumer Protection
|
Delaware
|
None
|
District
of Columbia
|
Mayor
and Council of District
|
Florida
|
Dept.
of Agriculture and Consumer
Services
|
Georgia
|
Sec.
of State
|
Hawaii†
|
Dept.
of Commerce and Consumer
Affairs
|
Idaho
|
None
|
Illinois
|
Attorney
General
|
Indiana
|
None
|
Iowa
|
None
|
Kansas
|
Sec.
of State; Attorney General;
District Attorney
|
Kentucky
|
Attorney
General
|
Louisiana*
|
Attorney
General; District Attorney
|
Maine
|
Commissioner
of Business Regulation;
Attorney General
|
Maryland
|
Sec.
of State; Attorney General
|
Massachusetts
|
Attorney
General (Division of
Public Charities)
|
Michigan
|
Attorney
General
|
Minnesota
|
Attorney
General
|
Mississippi
|
Sec.
of State; Attorney General;
District Attorney; County
Prosecuting Attorneys
|
Missouri
|
Attorney
General
|
Montana
|
None
|
Nebraska
|
None
|
Nevada
|
None
|
New Hampshire
|
Attorney
General
|
New Jersey
|
Attorney
General
|
New Mexico
|
Attorney
General
|
New York
|
Attorney
General
|
North
Carolina
|
Sec.
of State; Attorney General
|
North
Dakota
|
Sec.
of State; Attorney General;
State Attorney
|
Ohio
|
Attorney
General
|
Oklahoma
|
Sec.
of State; Attorney General;
District Attorney
|
Oregon
|
Attorney
General
|
Pennsylvania
|
Sec.
of State; Attorney General;
District Attorney
|
Rhode
Island
|
Dept.
of Business Regulation;
Attorney General
|
South
Carolina
|
Sec.
of State
|
South
Dakota
|
None
|
Tennessee
|
Sec.
of State; Attorney General
|
Texas‡
|
Sec.
of State; Attorney General
|
Utah
|
Division
of Consumer Protection
of Dept. of Commerce
|
Vermont
|
None
|
Virginia
|
Commissioner
of Agriculture and Consumer
Services; Attorney General;
Commonwealth, City,
County or Town Attorney
|
Washington
|
Sec.
of State; Attorney General
|
West Virginia
|
Sec.
of State; Attorney General
|
Wisconsin
|
Dept.
of Regulation and Licensing;
Attorney General
|
Wyoming
|
None
|
| *Only
organizations employing
professional solicitors
must register |
| †Only
professional solicitors
working for charities
must register |
‡Only
organizations that solicit
donations for law enforcement,
public safety or veterans
causes must register |
Notes: Information compiled
from the Multi-State Filer
Project Appendix of Cooperating
States, http://www.multistatefiling.org/n_appendix.htm.
Table is original and was
not acquired from any source.
Table
2:
|
State
Registration Fees
|
Alabama
|
$25.00
|
initial
registration fee only
|
Alaska
|
$40.00
|
initial
registration fee only
|
Arizona
|
None
|
|
Arkansas
|
None
|
|
California
|
$25.00
|
initial
registration and annually
|
Colorado
|
$10.00
|
initial
registration fee only
|
Connecticut
|
$50.00
|
initial
registration fee only
|
Delaware
|
None
|
|
District
of Columbia
|
$80.00
|
initial
registration fee only
|
Florida
|
$10.00-$400.00
|
initial,
dependent on annual
revenue
|
Georgia
|
$25.00
and $10.00
|
initial
and annual renewal
|
Hawaii†
|
$250.00
|
initial
registration fee only
|
Idaho
|
None
|
|
Illinois
|
$15.00
|
initial
registration fee only
|
Indiana
|
None
|
|
Iowa
|
None
|
|
Kansas
|
$35.00
|
initial
registration fee only
|
Kentucky
|
None
|
|
Louisiana*
|
$25.00
|
initial
registration fee only
|
Maine
|
$100.00
and $25.00
|
initial
and annual renewal
|
Maryland
|
$50.00-$200.00
|
initial,
dependent on annual
revenue
|
Massachusetts
|
$50.00
|
initial
registration fee only
|
Michigan
|
None
|
|
Minnesota
|
$25.00
|
initial
registration fee only
|
Mississippi
|
$50.00
|
initial
registration fee only
|
Missouri
|
$15.00
|
initial
registration fee only
|
Montana
|
None
|
|
Nebraska
|
None
|
|
Nevada
|
None
|
|
New Hampshire
|
$25.00
and $75.00
|
initial
and annual renewal
|
New Jersey
|
60-250
|
initial,
dependent on annual
revenue
|
New Mexico
|
None
|
|
New York
|
$39,746.00
|
initial,
dependent on annual
revenue
|
North
Carolina
|
50-200
|
initial,
dependent on annual
revenue
|
North
Dakota
|
$25.00
and $10.00
|
initial
and annual renewal
|
Ohio
|
$50.00-$200.00
|
initial,
dependent on annual
revenue
|
Oklahoma
|
$15.00
|
initial
registration fee only
|
Oregon
|
$10.00-$200.00 &
% required
|
initial,
dependent on annual
revenue
|
Pennsylvania
|
$15.00-$250.00
|
initial,
dependent on annual
revenue
|
Rhode
Island
|
$75.00
|
initial
registration fee only
|
South
Carolina
|
$50.00
|
initial
registration fee only
|
South
Dakota
|
None
|
|
Tennessee
|
$50.00-$300.00
|
initial,
dependent on annual
revenue
|
Texas‡
|
$50.00
|
initial
registration fee only
|
Utah
|
$100.00
|
initial
and annual renewal
|
Vermont
|
None
|
|
Virginia
|
$100.00
+ $30.00-$325.00
|
initial,
dependent on annual
revenue
|
Washington
|
$20.00
and $10.00
|
initial
and annual renewal
|
West Virginia
|
$15.00-$50.00
|
initial,
dependent on annual
revenue
|
Wisconsin
|
$15.00
|
initial
registration fee only
|
Wyoming
|
None
|
|
|
*Only
organizations employing
professional solicitors
must register
|
†Only
professional solicitors
working for charities
must register
|
‡Only
organizations that solicit
donations for law enforcement,
public safety or veterans
causes must register
|
Notes: Information compiled
from the Multi-State Filer
Project Appendix of Cooperating
States, http://www.multistatefiling.org/n_appendix.htm.
Table is original and was
not acquired from any source.
Table
3:
|
Checklist
for Initial URS Registrations
|
|
Fee
|
State
Forms
|
IRS
Letter
|
FR
Contracts
|
Bylaws
|
Inc
Letter
|
990
|
Audit
|
Notarized
|
Alabama
|
X
|
|
X
|
|
X
|
X
|
|
|
X
|
Alaska
|
X
|
|
|
X
|
|
|
X
|
X
|
|
Arizona
|
|
|
X
|
|
|
|
X
|
|
X
|
Arkansas
|
|
X
|
X
|
X
|
|
|
X
|
X
|
X
|
California
|
X
|
X
|
X
|
|
X
|
X
|
X
|
X
|
|
Connecticut
|
X
|
|
|
|
|
|
X
|
X
|
|
D.C.
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
|
X
|
Georgia
|
X
|
X
|
X
|
|
|
|
X
|
X
|
X
|
Illinois
|
X
|
|
X
|
X
|
X
|
X
|
X
|
X
|
|
Kansas
|
X
|
|
X
|
|
|
X
|
X
|
X
|
|
Kentucky
|
|
|
|
|
|
|
X
|
|
X
|
Louisiana
|
X
|
|
|
X
|
X
|
X
|
X
|
X
|
|
Maine
|
X
|
|
X
|
|
|
|
X
|
X
|
X
|
Maryland
|
X
|
|
X
|
X
|
X
|
X
|
X
|
X
|
|
Massachusetts
|
X
|
|
X
|
|
X
|
X
|
X
|
X
|
|
Michigan
|
|
|
X
|
X
|
X
|
X
|
X
|
X
|
|
Minnesota
|
X
|
|
X
|
X
|
|
X
|
X
|
|
|
Mississippi
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
Missouri
|
X
|
|
X
|
X
|
|
X
|
X
|
|
X
|
New
Hampshire
|
X
|
|
X
|
|
X
|
X
|
X
|
X
|
X
|
New
Jersey
|
X
|
|
X
|
X
|
X
|
X
|
X
|
X
|
|
New
Mexico
|
|
|
X
|
X
|
|
X
|
X
|
X
|
X
|
New
York
|
X
|
|
X
|
|
X
|
X
|
X
|
X
|
|
North
Carolina
|
X
|
|
X
|
X
|
|
|
X
|
|
X
|
North
Dakota
|
X
|
X
|
X
|
X
|
|
X
|
X
|
|
X
|
Ohio
|
X
|
|
X
|
|
X
|
X
|
X
|
|
X
|
Oregon
|
X
|
|
X
|
|
X
|
X
|
X
|
|
|
Pennsylvania
|
X
|
|
X
|
|
X
|
X
|
X
|
X
|
|
Rhode
Island
|
X
|
|
X
|
X
|
|
X
|
X
|
X
|
X
|
South
Carolina
|
X
|
|
|
X
|
|
|
X
|
|
X
|
Tennessee
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
|
Utah
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
|
X
|
Virginia
|
X
|
|
X
|
X
|
X
|
X
|
X
|
X
|
|
Washington
|
X
|
|
X
|
X
|
|
|
X
|
|
|
West
Virginia
|
X
|
X
|
X
|
X
|
|
|
X
|
X
|
X
|
Wisconsin
|
X
|
X
|
X
|
|
X
|
X
|
X
|
X
|
X
|
|
86%
|
25%
|
86%
|
58%
|
53%
|
69%
|
97%
|
64%
|
53%
|
Notes: Table acquired from
the Multi-State Filer Project
Appendix of Cooperating States, http://www.multistatefiling.org/p_checklist.htm.
Statistical averages calculated
by author.
References
Charitable Solicitations Law.
Vt. Stat. Ann. § 2471 – §
2479. 1989.
Delaware Uniform Unincorporated
Nonprofit Association Act.
Del. Code Ann. § 1901 - §
1916. 1997.
Giving USA Foundation. Giving
USA 2005: The Annual Report
on Philanthropy for the Year
2005. Center on Philanthropy
Indiana University: 2006.
Giving USA Foundation. Giving
USA 2006: The Annual Report
on Philanthropy for the Year
2006. Center on Philanthropy
Indiana University: 2007.
Hart, Ted, James M. Greenfield,
and Michael Johnston, ed. Nonprofit
Marketing
Strategies: Best Practices
for Marketing, Communications,
and Fundraising. New Jersey:
John Wiley
& Sons, Inc., 2005.
Idaho Charitable Solicitation
Act. Idaho Stat. § 48.1201
– § 48.1206. 1993.
Johnston, Michael. “The Internet
and the Regulation of the
Nonprofit Sector.” New
Directions
for Philanthropic Fundraising 25
(1999): 39-56.
National Association of State
Charities Officials. “The
Charleston Principles: Guidelines
on
Charitable Solicitations Using
the Internet.” 2001: 1-18.
Nonprofit Corporation Act.
Neb. Rev. Stat. § 21-1901
– § 21-19,177. 1996.
Nonprofit Corporations Act.
Nev. Rev. Stat. § 82.006 –
§ 82.546. 1991.
Professional Fundraiser Consultant
and Solicitor Registration
Act. Ind. Code § 23-7-8-1
–
§ 23-7-8-9. 1999.
Revised Iowa Nonprofit Corporation
Act. Iowa Code § 504.101 –
§ 504.1705. 2004.
Telephone Solicitation Act.
S.D. Codified Laws § 37-30-1
– § 37-30-29. 1990.
United States v. Thomas.
74 F.3d 701. 6th Cir.
1996.
Wyoming Nonprofit Corporation
Act. Wyo. Stat. § 17-19-101
– § 17-19-1807. 1993.
[1] GivingUSA,
http://www.givingusa.org/.
[2] “The
Charleston Principles,”
7.
[5] Delaware
Uniform Unincorporated Nonprofit
Association Act; Wyoming
Nonprofit Corporation Act;
Iowa Nonprofit Corporation
Act; Idaho Charitable Solicitation
Act; Nevada Nonprofit Corporations
Act; Nebraska Nonprofit
Corporation Act.
[6] Ind.
Code § 23-7-8-1 (1983);
Vt. Stat. Ann. § 2472 (1989);
S.D. Codified Laws § 37-30-3
(1990).
[7] The
Multi-State Filer Project,
Inc., http://www.multistatefiling.org/b_introduction1.htm.
[9] Johnston,
50. Hart, 268.
[11] 74
F.3d 701 (6 th Cir.
1996).
[13] “The
Charleston Principles,”
3.
[PRINTER FRIENDLY VERSION]
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