Fundraising Compliance is a key to growing a successful nonprofit
Fundraising Compliance, also known as Charitable Solicitation Registration, enables you to raise money from targeted audiences legally and successfully - and is essential to maintain credibility with donors and grant-makers.
This can present a sticky problem for nonprofit founders and boards, as it directly affects a nonprofit’s financial ability to fulfill its mission - while the costs are often prohibitive for smaller nonprofits.
What is Fundraising Compliance?
41 out of 50 U.S. states have enacted regulations on virtually every conceivable method of “charitable solicitation” – meaning fundraising activity – by nonprofits.
These laws are no longer limited to only mass mail and phone solicitation campaigns.
The internet has created tremendous opportunities for nonprofits to expand their donor base and fundraise at scale, but this is where state-level fundraising laws have become a huge pain point.
For example, featuring a “donate” button on your website, social media, and email campaigns are all forms of fundraising that require registration.
The registration process varies by state and depends on factors including annual revenues and method of fundraising, creating a confusing patchwork of regulations leading to a frustrating, time consuming, and potentially expensive path to navigate.
Who needs to be compliant?
In these 41 states, any nonprofit – with or without 501(c)3 tax-exempt status – must register before engaging in any kind of “charitable solicitation”.
This includes making any requests for money or property (including any offer to sell a product or service), event invitations, online donations or “awareness” campaigns.
Basically, this is every method a nonprofit might employ to raise funds.
In the past, only established organizations running direct mail and phone solicitation methods needed to be concerned about fundraising compliance.
Today, as organizations move fundraising activities online, nearly every nonprofit falls under the umbrella of requirements in one or more states, perhaps all 41.
To be clear, it is the act of providing an avenue to solicit funds – not actually receiving funds – that triggers the need for fundraising compliance registration.
That said, the registration process is challenging enough that the vast majority of nonprofits decline to register in any but their home state - and perhaps those few other states where they are raising money successfully - unless and until they have the kind of income that can sustain the expense for professional charitable registrations services.
Fundraising Compliance enforcement is ramping up
State government agencies have staffed enforcement departments with the goal of identifying non-compliant nonprofits and a violation can result in fines, civil or criminal penalties, and revocation of the right to raise funds.
Even, passive online donations, such as the “donate” button on your website, can result in your organization being targeted and penalized – even publicly listed as an “offender”- in online databases, damaging your reputation.
While most established nonprofits are registering nationally, those with limited budgets are “stair-stepping” their way to regional or national compliance by registering in the highest priority states first.
It’s important to get the facts and make sure you understand the requirements for your organization to keep it legal and successful, and we can help.
To your mission,
Jacqui Long | InstantNonprofit
