The Issue of Online Fundraising in Every State
Many charitable organizations are confused regarding their duties to register in states where they only solicit online. As a general rule, a charity must register with a state if it plans to solicit contributions via non-internet methods in that state.
The need to register is triggered by active solicitation efforts such as sending out mailers or participating in commercial co-ventures. The charity does not need to actually receive a donation to trigger registration obligations in many states.
With the widespread adoption of the internet, questions arise as to whether online fundraising requires registration in every state, as websites are accessible from anywhere. In many states, online fundraising methods such as social media or a donation button located on the charity’s website, without more, are considered “passive” and do not trigger registration.
However, in Alabama, California, Florida, Georgia, Illinois, Kansas, Maine, Michigan, New Jersey, New York, North Dakota, Ohio, Oklahoma, Rhode Island, Utah, Virginia, West Virginia, Wisconsin, and the District of Columbia, a mere donate here button does trigger registration.
The Charleston Principles
In 2001, The National Association of State Charity Officials developed the Charleston Principles for the purpose of helping states cultivate a standardized approach to regulating online fundraising and solicitation. The principles guide state officials in determining when charities and professional fundraisers must register and may be subject to enforcement actions regarding internet solicitations.
Under the Charleston Principles, a charity or professional fundraiser only has to register in a state if the charity or professional fundraiser solicits and receives gifts through a website and meets one of the following conditions:
- the website specifically targets physically located in a state for its solicitation;
- the charity receives contributions from the state through its website on a repeated and ongoing basis or a substantial basis (as defined under state law); or
- the charity sends email messages to residents of the state or contacts them in other ways, specifically to promote its website.
Note that the Charleston Principles are not codified into law but rather are referenced as a guide by a majority of state regulators when administering their registration laws. Charities and professional fundraisers may rely on these guidelines to assist them in complying with state regulations but should not exclusively rely on them when deciding whether to register in a given state.
Smaller Charities
Most large charities find it more efficient to register in all states rather than annually re-evaluate their levels of fundraising activity in each state. For smaller charities, it may not be financially reasonable or practical to do so. In those cases, charities should routinely:
- evaluate where it receives donations and the cumulative amount of donations from each state; and
- review co-venture agreements and professional fundraiser contracts to either limit the states where solicitation occurs or monitor the extent of the solicitation activities in each state.
Those smaller charities should also include a statement on their website disclaiming contributions from donors located in the states where the charity is not registered.
In this manner, nonprofits that are not prepared to register nationwide can dip their toe into online fundraising and ramp up additional states over time.
Kyler Mejia is an attorney with Caritas Law Group, P.C. Kyler advises nonprofit and socially responsible businesses on corporate, tax, and fundraising regulations nationwide as well as donors with regard to major gifts. To schedule a consultation, call 602-456-0071 or email us through our contact form.