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Has Your Organization been Blocked by Charitable Fundraising Platforms? It is likely due to California’s new “Good Standing” requirement.

In the past few months, a sizable number of nonprofit organizations were surprised to find themselves blocked from receiving donations through various online fundraising platforms including Facebook. The cause was failure to be in “good standing” in California. This “good standing” requirement is part of California’s law governing charitable fundraising platforms. Known as Assembly Bill 488 or AB 488, effective on January 1, 2023, one provision prevents platforms from facilitating donations to any organization that is not in “good standing” in California.    

Unfortunately, a charitable organization’s failure to be in good standing in California has implications far beyond the State. Charitable fundraising platforms will generally block all donations made to any organization that is not in good standing, not just those made by California residents. In many cases, the first time the organization became aware that they had a delinquency issue that needed to be resolved was when they received a notice sent by a fundraising platform informing them that they are not in good standing in California.  Unfortunately, many of these charities learned the hard way that resolution is neither quick nor easy, resulting in significant loss of donations, not to mention the expenses incurred when getting back into good standing.   Given the significant amount of fundraising now taking place through online fundraising platforms, it is paramount that charities ensure that they are in good standing pursuant to California’s new law.

How to Comply with California’s New “Good Standing” Requirement

Under AB 488, a charitable fundraising platform or platform charity may only “solicit, permit, or otherwise enable solicitations, or receive, control, or distribute funds from donations for recipient charitable organizations or other charitable organizations in good standing.” 

For a summary of the key provisions and definitions of “charitable fundraising platform” and “platform charity,” see California Enacts New Law to Regulate Charitable Fundraising Platforms

For a summary of the California Attorney General’s notice advising which provisions of AB 488 go into effect on January 1, 2023, and which were delayed due to pending issuance of implementing regulation, read Key Provisions of California Assembly Bill 488 Regulating Charitable Fundraising Platforms Take Effect January 1, 2023. According to the notice, the “good standing” requirement went into effect on January 1, 2023.

To comply with California’s “good standing” requirement, fundraising platforms and platform charities receiving funds through the platform must ensure that, with respect to each recipient organization: (1) the organization’s federal tax-exempt status has not been revoked by the Internal Revenue Service (“IRS”); (2) the organization’s tax-exempt status in California has not been revoked by the California Franchise Tax Board; and (3) the organization is not prohibited from soliciting or operating in the State by the California Attorney General.  

The California Department of Justice (“DOJ”) published a notice which includes links to the three lists that charitable fundraising platforms and platform charities must check for compliance with this requirement.

  1. The IRS’s Tax-Exempt Organization Search Tool
  2. California Attorney General’s list of charities that may not operate or solicit in the State
  3. California Franchise Tax Board’s Revoked Exempt Organizations List

Note that “good standing” does not necessarily mean that every recipient charitable organization included by a fundraising platform or platform charity must be registered to solicit in California.  For example, a small, local community organization based in another state that does not engage in solicitation in California, and generally does not receive donations from residents of California, including through fundraising platforms, would generally not be required to register in California due to lack of a sufficient jurisdictional nexus.  

Key Reasons that Organizations Fall Out of Good Standing

Common reasons that have caused organizations to fall out of good standing in California, and thereby get blocked by fundraising platforms, include the following:

  1. The organization was late in registering or renewing registration with the California Attorney General’s office, typically due to late completion of the organization’s IRS Form 990 or audited financial statement, which triggers delinquent status. 
  2. The organization filed its registration renewal paperwork but was sent a notice that the submission was incomplete, but the notice was not received.  
  3. The organization may have been mailed letters from the California Attorney General’s office advising them to register, but those letters were either lost in the mail, went to an incorrect address, or otherwise did not make their way to the right person. Failure to respond by registering (or seeking confirmation of exemption, if applicable, or otherwise establishing with the office that the organization is not required to register) automatically results in a delinquent registration status.  The initial letter from the AG advising the organization that it may be required to register may have been triggered by some common scenarios:

    1. The organization incorporated in the State of California, which, due to coordination between the California Secretary of State’s office and the Attorney General’s office, automatically triggers a letter advising the organization to register with the Attorney General’s Registry of Charitable Trusts. This letter may have gotten lost in the mail, or it failed to elicit a timely response.  
    2. A professional fundraiser or fundraising consultant of the organization listed the charity as a client in its California registration filings, triggering the letter.  Since the charity historically had not solicited contributions in California and did not understand the scope of its fundraiser’s services to include California, it may have chosen to ignore the letter.

Note: These misplaced or lost deficiency letters issued by the AG’s office are generally accessible by searching the California AG’s Online Registry Search Tool.

  1. The organization may have qualified to do business in California in the past, by employing individuals residing in the State.  (Note that whether an organization is required to qualify to do business in California is a specific, fact-driven analysis). Once qualified to do business in the State, the organization is unaware that it is subject to annual reporting obligations with the California Franchise Tax Board, thus causing an inadvertent delinquency when such filings are not submitted. 
  2. The organization may have had its 501(c)(3) tax-exempt status revoked by the IRS.  This often affects smaller organizations, particularly ones solely operated by volunteers, who were unaware that the organization had an annual IRS Form 990 filing obligation.  Failure to file the IRS Form 990 for three consecutive years leads to automatic revocation of federal tax-exempt status as soon as the third annual filing deadline passes.

In a number of cases, the charity at issue may be eligible for a statutory exemption from registration in California due to its status as a hospital, educational institution, or religious organization.  While California’s statute does not explicitly require such organizations to confirm their exemption from registration, as a matter of practice, the California Attorney General does require these organizations to confirm their exemption. For more information on registration exemptions, read Are Hospitals, Educational Institutions, and Religious Organizations Exempt from Charitable Solicitation Registration?

The documents and information that must be submitted to confirm an organization’s exemption from registration are outlined in California’s initial registration form instructions, and the AG’s office must issue a letter or notice confirming the organization’s exemption.  If California issued a letter advising the exempt organization that it may be required to register, and the letter goes unanswered, even if the organization would otherwise qualify for exemption, the organization will be put on the California AG’s May Not Operate or Solicit List

Obstacles to Establishing Good Standing (and How to Get Back into Fundraising Platforms’ Databases)

Many charities have found that the process to reinstate good standing is slow and painful. There are multiple steps to address deficiencies, delays in regulatory agencies’ processing of documents, and challenges to communicating an organization’s unique circumstances to the regulatory agencies. 

When a charity’s registration with California Attorney General’s office has expired, it must submit its renewal paperwork by US mail, landing the submission in an enormous pile of papers that the state is months behind in processing.  Even if an online process is available, the Attorney General’s time to review and final approval could be 90 days or more.

Similarly, the process for reinstatement with the Franchise Tax Board or IRS is cumbersome and time-consuming, involving back filings and reinstatement forms/applications.

Finally, charities should be aware that platforms may require blocked organizations who have resolved delinquency issues to take special steps to reactivate donations through the platform.  A number of platforms have issued public guidance on how they are addressing AB 488 compliance, including Meta and Bonterra. Complying with the platform’s process for reinstatement further delays a charity’s ability to fundraise on that platform.  The May Not Operate or Solicit List is only updated by the AG’s office once a month, thus further delaying the reinstatement process after organizations have resolved their delinquency.

Final Regulations are Still Pending that May Affect Implementation of the Good Standing Requirement

On November 17, 2023, the California Attorney General’s office issued a third set of Proposed Regulations to implement the provisions of AB 488, which include modifications to the procedures relating to “good standing”. The comment period ended on January 2, 2024.  We have been advised that final regulations are expected to be released in the next few months, which could cause some fundraising platforms to revise their procedures. Our firm is watching the status of the regulations. Stay tuned for further updates. 

A Final Note

We leave organizations with a final word of advice – Make sure your organization is not delinquent in California!  Given the broad, practical implications that failure to be in good standing creates, including the blocking of online donations received from any state through any charitable fundraising platform, organizations should make sure they closely monitor the applicable registration and filing deadlines to ensure they will not fall out of good standing in California. 

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who we work with

Our clients are diverse nonprofit organizations with a broad range of missions, as well as for-profit companies in evolving areas such as social enterprise, corporate philanthropy, joint ventures, technology-driven fundraising, and impact investing.

A.B. Data
AB InBev Foundation
Absolut Company
American Committee for the Weizmann Institute of Science
American Diabetes Association
American Friends of the Hebrew University
American Parkinson Disease Association
Americans for Ben Gurion University
Association of Fundraising Professionals
Avalon Consulting
Baton Rouge Area Foundation
Black Lives Matter Global Network Foundation
Bleeding Blue for Good Fund
Bradley Cooper’s One Family Foundation
BrightFocus Foundation
Brooks Brothers
Chadwick Boseman Foundation for the Arts
Changing Our World
Charity Defense Council
Christian Appalachian Project
Doctors of the World/ Medecins du Monde
Doctors Without Borders/ Medecins San Frontieres
Drug Policy Alliance
Duke University
Emory University
Estee Lauder Companies, Inc.
Feed The Children
Food For The Poor
Gerald R. Ford Presidential Foundation
Grameen Foundation USA
Hope for New York
International Campaign for Tibet
International Crisis Group
International Justice Mission
J. Crew Group
Johns Hopkins University
Lautman Maska Neill & Company
Lawyers Committee for Civil Rights Under Law

LSU Foundation
Marts & Lundy
Meyer Partners, LLC
Milken Institute
NAACP Foundation
National Alliance on Mental Illness (NAMI)
National Marrow Donor Program
National Park Foundation
Natural Resources Defense Council
North Carolina State University
North Shore Animal League
Operation Smile
PBS Foundation
Pernod Ricard USA
PetSmart Charities
PopSockets
Population Action International
Project ORBIS International
Public Interest Communication
Rails to Trails
Redeemer Presbyterian Church
Rockefeller Philanthropy Advisors
Save the Children Federation
Sesame Workshop
Simon Wiesenthal
SOS Children’s Villages – USA
Subaru of America
The Little Market
Touro University
United States Equestrian Team Foundation
United Way Worldwide
University of Connecticut
University of Virginia
Vote.org
Whitney Museum of American Art
World ORT
World Wildlife Fund
YWCA USA

A.B. Data
Absolut Company
American Committee for the Weizmann Institute of Science
American Diabetes Association
American Friends of the Hebrew University
American Parkinson Disease Association
Americans for Ben Gurion University
Association of Fundraising Professionals
Baton Rouge Area Foundation
BrightFocus Foundation
Burger King McLamore Foundation
Cancer Care
Carnegie East House and James Lenox House Association
Center for Car Donations
Changing Our World
Charity Defense Council
Christian Appalachian Project
Coca-Cola Scholars Foundation
Convoy of Hope
Cornell University
Doctors Without Borders/ Medecins San Frontieres
Drug Policy Alliance
Duke University
Emory University
Feed The Children
Gerald R. Ford Presidential Foundation
Grameen Foundation USA
Helen Keller Services
Hope for New York
Human Rights Watch
Humane Society of US
Indiegogo
International Campaign for Tibet
International Crisis Group
International Justice Mission
Japanese American National Museum
Johns Hopkins University
Lane Bryant Charities
Lautman Maska Neill & Company
Lawyers Committee for Civil Rights Under Law
LSU Foundation
Mattel
Meyer Partners, LLC
Milken Institute
National Breast Cancer Coalition
National Marrow Donor Program
Natural Resources Defense Council
North Carolina State University
North Shore Animal League
Obama Foundation
Operation Smile
PBS Foundation
Pernod Ricard USA
PetSmart Charities
Population Action International
Project ORBIS International
Public Interest Communication
Rails to Trails
Redeemer Presbyterian Church
Rock and Roll Hall of Fame and Museum
Rockefeller Philanthropy Advisors
Sesame Workshop
Simon Wiesenthal
SOS Children’s Villages – USA
Steinhardt Foundation
Subaru of America
United States Equestrian Team Foundation
University of Montana Foundation
University of Nevada, Las Vegas Foundation
Whitney Museum of American Art
World ORT
World Wildlife Fund
YMCA USA
YWCA of New York City
YWCA USA

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news & events

Our attorneys’ recent contributions to the media and nonprofit sector publications.

news & events

Check out our attorneys’ recent contributions to the media and industry publications.

Secure Your Data – Seriously, AFP New York Chapter News
As Jon Dartley, a data privacy and security attorney at Perlman and Perlman says, “It is vital to have the appropriate legal terms in the contract to protect your interests.”  Find out what your liability limit is.  Have it in writing who bears the responsibility and cost of a data breach.  And, have the vendor agree on a specific timeframe within which they need to advise you of a data breach.

Warning: Don’t Cut Legal Corners When Mixing Social And Business Impact,  Forbes
Particularly striking is that (Karen) Wu believes this is the “first multi-state regulatory activity involving cause marketing in almost two decades.”

Is stealing, then giving back, OK?
Cliff Perlman lends his advice on theft within a nonprofit.

Buyer Beware: Negotiating Terms in Technology Agreements
Jon Dartley provides tips on negotiating contracts with technology vendors.

Four Ways Charitable Giving Could Change with a Tax Overhaul
Cliff Perlman remarks on the possible threat of a change to charitable deduction.

How To Deal With Residual Data, Nonprofit Times
Jon Dartley’s advice on addressing “data exhaust”.

Secure Your Data – Seriously, AFP New York Chapter News
As Jon Dartley, a data privacy and security attorney at Perlman and Perlman says, “It is vital to have the appropriate legal terms in the contract to protect your interests.”  Find out what your liability limit is.  Have it in writing who bears the responsibility and cost of a data breach.  And, have the vendor agree on a specific timeframe within which they need to advise you of a data breach.

Warning: Don’t Cut Legal Corners When Mixing Social And Business Impact,  Forbes
Particularly striking is that (Karen) Wu believes this is the “first multi-state regulatory activity involving cause marketing in almost two decades.”

Is stealing, then giving back, OK?
Cliff Perlman lends his advice on theft within a nonprofit.

Buyer Beware: Negotiating Terms in Technology Agreements
Jon Dartley provides tips on negotiating contracts with technology vendors.

Four Ways Charitable Giving Could Change with a Tax Overhaul
Cliff Perlman remarks on the possible threat of a change to charitable deduction.

How To Deal With Residual Data, Nonprofit Times
Jon Dartley’s advice on addressing “data exhaust”.

perlman & perlman philanthropic sector law firm blue and green logo

click to exit page

perlman & perlman philanthropic sector law firm blue and green logo

click to exit page

silk lanterns

who we work with

Our clients are diverse nonprofit organizations with a broad range of missions, as well as for-profit companies in evolving areas such as social enterprise, corporate philanthropy, joint ventures, technology-driven fundraising, and impact investing.

who we work with

Our clients are diverse nonprofit organizations with a broad range of missions, as well as for-profit companies in evolving areas such as social enterprise, corporate philanthropy, joint ventures, technology-driven fundraising, and impact investing.

A.B. Data
AB InBev Foundation
Absolut Company
American Committee for the Weizmann Institute of Science
American Diabetes Association
American Friends of the Hebrew University
American Parkinson Disease Association
Association of Fundraising Professionals
Avalon Consulting
Baton Rouge Area Foundation
Black Lives Matter Global Network Foundation
Bleeding Blue for Good Fund
Bradley Cooper’s One Family Foundation
BrightFocus Foundation
Brooks Brothers
Chadwick Boseman Foundation for the Arts
Changing Our World
Charity Defense Council
Christian Appalachian Project
Doctors of the World/ Medecins du Monde
Doctors Without Borders/ Medecins San Frontieres
Drug Policy Alliance
Duke University
Emory University
Estee Lauder Companies, Inc.
Feed The Children
Food For The Poor
Gerald R. Ford Presidential Foundation
Grameen Foundation USA
Hope for New York
International Campaign for Tibet
International Crisis Group
International Justice Mission
J. Crew Group
Johns Hopkins University
Lautman Maska Neill & Company
Lawyers Committee for Civil Rights Under Law
LSU Foundation

Marts & Lundy
Meyer Partners, LLC
Milken Institute
NAACP Foundation
National Alliance on Mental Illness (NAMI)
National Marrow Donor Program
National Park Foundation
Natural Resources Defense Council
North Carolina State University
North Shore Animal League
Operation Smile
PBS Foundation
Pernod Ricard USA
PetSmart Charities
PopSockets
Population Action International
Project ORBIS International
Public Interest Communication
Rails to Trails
Redeemer Presbyterian Church
Rockefeller Philanthropy Advisors
Save the Children Federation
Sesame Workshop
Simon Wiesenthal
SOS Children’s Villages – USA
Subaru of America
The Little Market
Touro University
United States Equestrian Team Foundation
United Way Worldwide
University of Connecticut
University of Virginia
Vote.org
Whitney Museum of American Art
World ORT
World Wildlife Fund
YWCA USA

A.B. Data
Absolut Company
American Committee for the Weizmann Institute of Science
American Diabetes Association
American Friends of the Hebrew University
American Parkinson Disease Association
American Rivers
Association of Fundraising Professionals
Baton Rouge Area Foundation
BrightFocus Foundation
Burger King McLamore Foundation
Cancer Care
Carnegie East House and James Lenox House Association
Center for Car Donations
Changing Our World
Charity Defense Council
Christian Appalachian Project
Coca-Cola Scholars Foundation
Convoy of Hope
Cornell University
Doctors Without Borders/ Medecins San Frontieres
Drug Policy Alliance
Duke University
Emory University
Feed The Children
Gerald R. Ford Presidential Foundation
Grameen Foundation USA
Helen Keller Services
Hope for New York
Human Rights Watch
Humane Society of US
Indiegogo
International Campaign for Tibet
International Crisis Group
International Justice Mission
Japanese American National Museum
Johns Hopkins University
Lane Bryant Charities
LSU Foundation
Mattel
Meyer Partners, LLC
Milken Institute
National Breast Cancer Coalition
National Marrow Donor Program
Natural Resources Defense Council
North Carolina State University
North Shore Animal League
Obama Foundation
Operation Smile
PBS Foundation
Pernod Ricard USA
PetSmart Charities
Population Action International
Project ORBIS International
Public Interest Communication
Rails to Trails
Redeemer Presbyterian Church
Rock and Roll Hall of Fame and Museum
Rockefeller Philanthropy Advisors
Sesame Workshop
Simon Wiesenthal
SOS Children’s Villages – USA
Steinhardt Foundation
Subaru of America
United States Equestrian Team Foundation
University of Montana Foundation
University of Nevada, Las Vegas Foundation
Whitney Museum of American Art
World ORT
World Wildlife Fund
YMCA USA
YWCA of New York City
YWCA USA
Lautman Maska Neill & Company
Lawyers Committee for Civil Rights Under Law

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We view our clients as partners that share our commitment to bring about change in the world. Our goal is to provide them the peace of mind of knowing that they are in compliance with their legal obligations and to further empower them to achieve positive social impact and financial success.

Our Mission

Our mission is to provide the highest quality, integrity-driven legal services to our clients, using a practical, consultative, client-focused approach to identify and respond to problems and challenges.

We strive to maintain a culture characterized by respect, opportunity, diligence, mutual empowerment, entrepreneurship, and fair reward for efforts made on behalf of clients and the firm.

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