Why Charities Need to Pay Attention to State Registration Laws

October 19, 2009

Why Charities Need to Pay Attention to State Registration Laws

Is your nonprofit group registered to solicit money in all 50 states?

In the past, it wasn’t necessary for many groups to file registration papers outside of their home states. But with the advent of online fund raising, many organizations are probably violating laws in some states because they are collecting donations without letting state authorities know.

Tony Martignetti, a planned-giving adviser in New York and author of Charity Registration: State-by-State Guidelines for Compliance, says he believes as many as 90 percent of all nonprofit groups have not complied with state registration laws.

And some states are starting to crack down.

This month, for instance, a foundation operated by H. Lamar Willis, an Atlanta city-council member, was fined $25,000 by Georgia regulators because it was not registered in that state, The Atlanta Journal-Constitution reports.

What should your organization be doing to make sure it is following these laws? Listen to the latest episode of Philanthropy This Week, which features an interview with Mr. Martignetti about charity registration.

— Peter Panepento

Comments

The section of the interview on internet fundraising is a bit confusing and potentially misleading because it does not make note of constitutional principles that limit states’ power to regulate organizations when they are not directly targeting the state. The Charleston Principles were developed by state regulators to help both the regulators and charities understand how and when organizations’ internet activities could cause an organization to need to register in a particular state. The mere presence of a donate page on a website, without some more direct action on the part of the charity to target the states’ residents, will not trigger state registration. Organizations should discuss with their legal counsel whether their internet activities (including emails) may trigger state registration requirements. For further information, you can read the Charleston Principles at http://www.nasconet.org/Charleston%20Principles,%20Final.pdf. Seth Perlman and I have also written an article on internet fundraising regulation, available at http://www.perlmanandperlman.com/pubs/articles/Internet%20Fundraising%20Article%201.pdf.

— Karen I. (Chang) Wu, Perlman & Perlman, LLP Oct 23, 04:30 PM #
There used to be a time that the Chronicle ran a list of state registration requirements on an annual basis. I have not seen that list in many years, consequently the awareness of these issues are not supported by the trade publications who will report the shortcomings of those who fail. The article ought to have started with are you register in the state you are domiciled. Because I am confident that if you are not registered in the state you conduct business, a nonprofit organization has not even considered the possibility of registering in other states.
State organizations (Georgia’s office of the Secretary of State for example) are not very pro-active in educating non-profit about the need to register. Databases supporting the efforts of the state regulators are often inadequate. (The last time I stopped by the Illinois Attorney General’s office that dealt with charitable registration issues, they had files on the floor and were not fully computerized.) Public policies adopted by state legislature and the funding of those department empowered to enforce the policies are not in harmony. Policies regarding fund raising practices, I was once told, are adopted to catch the most egregious offenders when they are identified.
The questions then for any nonprofit organizations who choose to ignore the rules of registration are is my state proactive in enforcing the registration requirements, am I willing to take a chance on getting caught, and has my state or the states my organization fundraises in decided that non-registration is a revenue generating offense worth pursuing? If the answer to any of these is yes, then an organization needs to revamp its approach to registration.
For those organizations that are appropriately registered in their own state, the question is different in one respect. You already understand that policies on registration exist. Now one must decide how your activities interact with those of the states you target. Different states have different policies and thresholds. All of these issues and more must be examined to determine if you need to register. Simply put, one must exercise due diligence to insure that they are operating within the letter of the law and that due diligence is becoming increasingly more difficult to do without help from many sectors.

— John C. McGee Oct 24, 02:24 PM #

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