The Importance of Fundraising Registration

Fundraising registration is a huge, often overlooked part of starting a nonprofit.

Most nonprofits fundraise. But not many nonprofits understand the importance of complying with their state’s fundraising registration requirements. Forty states require an organization to register with the state’s charitable solicitations authority BEFORE they solicit funds. As fundraising season approaches, make sure you’ve properly registered wherever you plan to ask for charitable contributions!

And, as you might expect, each state has different requirements for initial registration, exemptible organizations, and registration renewal.

This post will be a primer on charitable solicitation registration, because there is no way I could cover everything. You’ll find helpful tools throughout the article so that you can investigate on your own.

Today, I’ll discuss the importance of registering in your home state, registering in other states, and penalties for noncompliance.

Fundraising in Your Home State

New nonprofits should always register in their state of incorporation. Review the state’s exemption requirements, too. Some organizations, though exempt, still choose to register.

For existing organizations, if your solicitation activities and donors are confined to a locality, registering in only your home state may suffice.

Forty-states require initial registration in order to solicit its citizens. In those states, you’ll need to file a specific form, along with a fee, with that state’s Charitable Solicitations Authority (usually the Attorney General). You may also need to renew your registration on a periodic basis.

If you don’t currently solicit funds in one of the other seven states, you’re not completely off the hook. If you wish to fundraise outside your state’s borders, you will have to comply with the new state’s requirements.

Fundraising in Other States

As your organization decides to solicit funds in, or attracts willing donors from another state, you might have to register there as well.

Just like in your home state, you’ll file a form with, and pay a fee to, the new state. Many states accept the Unified Registration Statement (URS), which simplifies the registration process a great deal.

However, two situations add complexity:

• Foreign qualification: Some states require you first to register your nonprofit corporation with the Secretary of State, and then register for fundraising. This adds costs, time, and often confusion to the process.

• Online Donations: Many nonprofits have a “Donate Now” button on their website. In the eyes of the law, this could be interpreted as soliciting funds in every state. If this applies to you, read up on Online Fundraising and the Charleston Principles.

Penalties for Noncompliance

States want to know that legitimate organizations are soliciting its citizens. Failing to register can result in fines and other penalties, but there are several other reasons to register:

1) It’s the law. Each state has specific requirements for registering, and they have creative penalties for late or improper registration.

2) The IRS requires it. On your annual Form 990 filing, you have to disclose in which states you have registered to fundraise.

3) Your donors may ask. They want to know your nonprofit is registered and compliant. Moreover, many states maintain a directory of charitable organizations exclusively for your donors’ use.

All this can be intimidating to a small nonprofit, but it’s better to be cautious. Do your research, consult your records, and check with the state, to ensure your organization is compliant in its fundraising activities!