Once you’ve officially started your nonprofit, there are a few key preparations to make before you start fundraising. Most importantly, before your nonprofit accepts a single penny, it’s likely that you will need to file a Nonprofit Charitable Solicitation registration form. This is required in all states that your nonprofit is planning on soliciting donations in.
Solicitation defined as asking for a donation. Any time that your nonprofit directly requests a monetary gift from an individual or organization, this is considered solicitation. Solicitation includes but is not limited to:
- Phone banking
- Direct mail appeals
- Grant applications (yes, really!)
- Major donor asks
- Door-to-door canvasing
- Charitable event sponsorship
Do I need Charitable Solicitation Registration status to get grants?
New nonprofit founders often express confusion over whether they need this registration if they’re not planning to solicit donations from individuals. Even if the source of your funding is from another state, the vast majority of grant applications explicitly require that you have attained charitable solicitation registration at least in your organization’s home state. If you are found to have applied without the appropriate paperwork, your grantor can revoke your funding or even pursue legal action — not to mention permanently damaging relationships with your funder.
How do Charitable Solicitation Registration requirements vary by state?
As of 2019, 37 states require nonprofit fundraising registration. Nine states do not require registration, and four states have limited requirements.
The nine states that do NOT require fundraising registration are:
- South Dakota
Limited requirement states: Certain types of nonprofits (such as those that deal with public safety or supporting veterans) can be exempt from fundraising requirements in some states. The four states with limited fundraising requirements are:
- Texas: Limited requirement application to law enforcement, public safety, and veterans organizations.
- Arizona: Requires charitable veterans organizations to register if they are soliciting money or other support in the state.
- Louisiana: Only requires registration if a charity engages paid, professional solicitors to fundraise in their state.
- Missouri: Exempts 501(c)(3), 501(c)(7), and 501(c)(8) organizations upon application.
What if someone just decides to give me money on their own?
Unsolicited donations from a resident or organization from outside of your registered state will not violate your charitable solicitation standing. However, any followup communication with the donor encouraging them to donate again (also known as donor stewardship) will count as solicitation. In this situation, it’s up to your organization to weigh how significant that donor is and if you are willing to ask for another donation without registration, or if you will apply to register in the donor’s state.
But what about the Internet?
Between social media, email outreach and “Donate Now” buttons, the Internet has transformed almost every facet of how nonprofits recruit donors — but that’s not necessarily reflected in the rules. As policy catches up to tech, there’s still a lack of clarity as to what’s “soliciting” and what’s “throwing out a line and hoping something bites.”
The National Association of State Charity Officials (NASCO) created a set of guidelines called the Charleston Principles in 2001 aiming to resolve this exact issue. The rules are complex and many are reflected in state law, so we encourage you to read and evaluate them before beginning any kind of online fundraising campaign.
In addition to solicitation registration, some areas require that nonprofit organizations periodically submit financial statements if any of their assets subject to a charitable trust. For more information on this type of periodic state reporting, visit the IRS website.
Resilia is not a financial advisement institution nor does this article constitute legal advice. Your charitable solicitation requirements are wholly dependent on your organizational structure, fundraising activities and state laws.