Whether you’re new to online fundraising, or a pro, online fundraising compliance can be confusing for everyone. With differing laws and procedures in each state, staying compliant with regulations can be a headache for your organization.
But doing a little homework can go a long way in making sure you’re following all the proper regulations at your nonprofit. We’ve broken down everything you need to know about online fundraising compliance, so your nonprofit can keep raising funds without any legal hassle.
So...what is fundraising compliance?
Fundraising compliance is the formal registration that’s required by certain states before nonprofits can ask for donations.
As well as becoming a 501(c)(3) exempt organization, 41 states require nonprofits to file a formal registration with the state before soliciting donors — regardless of whether funds are actually received. This means organizations must register with the state before asking for donations by phone, mail, in person, or even online.
What about online fundraising compliance?
When it comes to online fundraising compliance, some of these laws can get a little bit tricky.
With traditional solicitation, compliance is pretty straightforward. If you send an appeal letter to someone in Ohio, you need to comply with the requirements in that state. Simple!
But online fundraising compliance is more complex, because technically anyone — in any state — could access and donate to you through online donation forms.
Not all laws are clear about what exactly constitutes an online solicitation. To help give nonprofits a clearer set of guidelines, the National Association of State Charity Officials (NASCO) released the Charleston Principles in 2001. These guidelines are not law, but are recommendations for handling online fundraising compliance.
The Charleston Principles recommend registration if:
- You allow donors to give online (ex: a “Donate Now” button)
- You send email appeals to encourage online donations
- You receive substantial or recurring contributions from a specific state
If you’re like most nonprofits, these recommendations will apply to you. Since these “modern” guidelines were created, more and more nonprofits have turned to online fundraising — and these principles don’t even include more recent tools, like social media.
Why does it matter?
It’s possible that you’ve been fundraising for years without registration — so why start now?
There are several benefits to online fundraising compliance, including:
- Transparent process. Donors will know their donation is going to a registered (and responsible!) organization, so they’ll feel more secure.
- Increased donations. Many states require disclosure statements to be included on your solicitation materials and website — which actually increases the likelihood of receiving a gift!
- Public charity databases. Your nonprofit will be listed in public charity databases used by foundations, individuals, and corporate donors researching organizations — and you could miss out on donations if you’re not listed.
- It’s easy! With your online fundraising software, the proper legal requirements should be built right in — so you don’t have to worry about the technical requirements.
Arguably the biggest benefit is avoiding any penalties. Because online fundraising compliance is the law, it’s important to follow requirements to stay out of legal trouble.
Penalties associated with not registering can include:
- State fines, fees, and penalties
- Legal action against staff
- Revoked tax exempt status
- Losing the right to solicit funds
- Bad PR
- Damaged relationships with funders
- Lost donations or grants
Bottom line: If you’re fundraising online in any capacity, it’s best to be safe and comply with any registration requirements.
[Action Items] How you can stay compliant
1. Register in your state
At the very least, you should register in your own state — presumably, that’s where most of your fundraising will take place.
Here’s what most states require for applications:
- IRS Form 990
- IRS Determination Letter
- List of directors and/or officers
- Disclosure statements (in some states)
- Other items, depending on state requirements
Depending on your state, you may also need to pay a fee for registration. This can range anywhere from $0 to $400, depending on your organization’s revenue.
2. Prioritize your needs for other states
You have a few options for online fundraising compliance registration in other states:
- Register in all states. If you’re consistently accepting online donations from across the country, it’s probably best to register in all states. You could also go with this option if you’d rather do the work upfront to fundraise freely in any state and avoid hassles down the line.
- Or just the states that make sense for you. If you only solicit gifts from one region or a few states, it’s probably best to register in those states. That way, you’ll avoid any compliance issues with your most frequent donors.
- Consider exemptions. Many states allow you not only to register, but to exempt your organization from soliciting in that state. Consider this for any states you do not actively solicit from and will not accept donations from — but be aware that exemptions do also require paperwork, and sometimes a fee.
3. Add a disclaimer to your donation form
Regardless of your approach to online fundraising compliance, be transparent and disclose your status on your website (or better yet, your donation form!). Your donors will thank you, and it could help you secure more donations.
Filing & Renewing
For most states, you’ll be required to file your registration and renewals by paper. A few allow online filing or email/fax filing, so check the procedure for your state.
Many states use the Unified Registration Statement (URS), which is a standardized charitable solicitation application form. Not all states accept this form, and many require a supplement — so make sure to check any states you’re registering with for their specific requirements.
When renewing, most states require your most recent financial information. Some states will require you to re-submit organizing documents each year.
Be wary of renewal deadlines. They vary from state-to-state, and some can line up with tax season (if your organization runs on a calendar fiscal year). Many states allow extensions, which you must file for in advance.
So there you have it — everything you need to know about online fundraising compliance!
Many organizations turn to third-party fundraising compliance experts, like our partners at Harbor Compliance. Even if you don’t need someone to handle your organization’s compliance, they do have a lot of great resources on compliance for nonprofits.
How does your organization stay compliant with online fundraising requirements? Any tips for other nonprofits? Let us know in the comments!