Here are five of the most frequently asked questions on cause marketing compliance that we are asked.  

1. When and where must a company be registered to conduct a charitable sales promotion (also known as a CCV)? What about the nonprofit beneficiary? 
2. Does a company need to register as a commercial co-venturer in every state that has a CCV registration requirement if it’s only conducting a charitable sales promotion on its website? 
3. What advertising disclosures must be included in a charitable sales promotion, and how can companies run into issues with their disclosures? 
4. What key strategies can nonprofits use to navigate unrelated business income tax (“UBIT”) issues during their cause marketing campaigns and corporate partnerships? 
5. What options are available for companies to engage with nonprofits that offer public visibility but are not subject to state CCV registration and reporting requirements? 

Navigating the compliance landscape of cause marketing can be complex. Still, the core goal remains the same: to ensure transparency, protect consumers, and make sure companies fulfill their commitments to nonprofit partners.

Cause marketing is powerful because it allows consumers to make a positive impact through their purchasing decisions. By proactively addressing registration requirements, providing clear disclosures, and strategizing with your nonprofit partner on the optimal campaign structure, companies can ensure that their campaigns are both effective and compliant with legal requirements. For more detailed answers to these questions and additional resources about cause marketing, visit the website of our long-term partner, Engage for Good — the leading community where cause meets commerce.

The post Cause Marketing Compliance – Top Five Questions appeared first on Perlman & Perlman.

Strategic Adaptations for 2026 and Beyond

To meet this evolving challenge, both sectors must adapt their partnership strategies.

For Businesses and Nonprofits

Implement “Bunching” Strategies

• Focus on negotiating larger, multi-year partnership commitments. This allows the company to concentrate contributions into specific tax years, ensuring the total donation clears the 1% threshold and maximizes the tax benefit.
• Explore Alternative Structuring of Cause Marketing Programs: Companies engaging in cause marketing can explore structuring of its cause marketing partnerships to generate royalty payments (in exchange for the use of the nonprofit’s name or logo) rather than traditional charitable donations, which may offer a different path for deductibility.

For Nonprofits

Deepen CSR Alignment

• Shift the focus from short-term campaigns to long-term partnerships that are inextricably linked to the corporate partner’s core values and robust CSR goals. Partnerships that demonstrate strong, long-term social impact will prove more sustainable than those driven purely by annual tax incentives.

By proactively adjusting their financial and engagement strategies now, both businesses and nonprofits can ensure their collaborations continue to thrive and generate meaningful impact despite the evolving tax rules.

This update was originally published in the December 2025 email newsletter of the firm’s long-term partner, Engage for Good— the leading community where cause meets commerce.

The post Preparing for the 2026 Tax Shift: Strategic Considerations for Corporate Partnerships appeared first on Perlman & Perlman.

Twenty-six states require fundraising counsel to register prior to providing services. The state’s interest is to protect charitable assets for their intended use and to ensure that donations contributed by state residents are not misapplied through fraud or other means.

Who Qualifies as a Fundraising Counsel?

A fundraising counsel (“FRC”) is generally a person or entity paid to plan, manage, advise, counsel, consult, or prepare materials for, or with respect to, a charitable solicitation. A fundraising counsel does not solicit contributions or have custody of solicited funds.  Most often, an FRC is paid a fixed fee or rate rather than a percentage of contributions collected. Consultants providing services that fit within the definition of a fundraising counsel, but who also solicit contributions, have custody of funds, or are compensated on a percentage basis may be considered “professional fundraisers” under some state laws. Professional fundraisers are subject to greater regulatory obligations, including obtaining bonds and filing detailed reports after each solicitation campaign.

Typically, an FRC provides strategic planning services with the goal of improving a charity’s fundraising activities in order to increase donations. States define “fundraising counsel” broadly, however, and thus FRC services include a variety of activities, such as the following:

• A company hired to design and manage a direct mail campaign
• A company hired to manage an annual fundraising gala
• An individual hired to design a digital fundraising strategy
• A firm hired to develop a major gift or capital campaign strategy
• An individual hired to prepare fundraising materials, including providing advice on how best to use the materials to maximize fundraising results
• An individual hired to coach an organization’s development staff or volunteers who are conducting peer-to-peer fundraising campaigns
• An online fundraising platform that is paid by a charity to help optimize its fundraising efforts. (This might include providing customized advice on how to better use the platform’s tools to maximize the charity’s fundraising success. Since each state has adopted slightly different definitions of “fundraising counsel,” states may reach varying conclusions on a platform’s classification.)

Where Do Fundraising Counsels Need To Register?

The key question in determining whether a fundraising counsel must register is whether sufficient contacts exist between the fundraising counsel and the state such that it is not fundamentally unfair for the state to subject the fundraising counsel to its registration and reporting requirements. The fundraising counsel must purposefully avail itself of the privilege of conducting activities within the state. Several Supreme Court cases have addressed whether a fundraising counsel has enough contact with a state to be subject to its regulatory jurisdiction. Interpretation of these cases suggests the following takeaways:

• Fundraising counsel should register in the state where the charity is located;
• Fundraising counsel may have to register in the state where they are domiciled;
• Fundraising counsel that advise charities with respect to solicitation in particular counties, states or regions or that, in some other way, target a particular state with its fundraising counsel activities should register in the targeted states. For example, a fundraising counsel that, as part of managing a direct mail campaign, recommends specific donor mailing lists, should register in the states where the direct mail recipients reside.

Online fundraising platforms are often structured to avoid classification as a fundraising counsel. Common reasons for falling outside the fundraising counsel definition are either that the online platform is directed at providing technology rather than consulting services, or the platform does provide fundraising counsel services but is also collecting a percentage of funds raised, thereby triggering categorization as a professional fundraiser.

Determining whether an online fundraising platform is classified as fundraising counsel, and if so, where it should register, requires a nuanced analysis that takes into consideration published guidelines for state regulation of online fundraising. A concise analysis of this issue is contained in my colleague Karen Wu’s Nonprofit Times article A Moving Target: The regulation of online fundraising platforms

Fundraising Counsel Contracts

In addition to the registration requirements, state charitable solicitation statutes require that contracts between a charity and a fundraising counsel include certain provisions. Common contract provisions required by state statute including the following:

• Legal name/address of the charity
• Statement of the charitable purpose for which the solicitation campaign is being conducted
• A clear statement of the fees to be paid to the fundraising counsel
• The effective/termination dates of the contract
• A statement that the fundraising counsel will not have control or custody of funds
• A statement that the charity exercises control and approval over the content, volume and/or frequency of any solicitation
• California and New York require lengthy cancellation provisions designed to allow the charity cancel the contract within 10-15 days of signing without penalty
• Several states require the contract to be signed by two authorized officials of the charity

The services fundraising counsel provide can be of great value to nonprofit organizations. Understanding the regulatory framework governing fundraising counsels will help you avoid missteps that can lead to actions by state regulators, including fines and penalties. It is incumbent on both the fundraising counsel and its charity clients to take the steps that ensure compliance under state charitable solicitation laws seriously. If in doubt, it’s always a good idea to seek counsel.

The post Advising Nonprofits on their Fundraising Strategy? You May Need to Register appeared first on Perlman & Perlman.

Charitable sales promotions (a/k/a “CCV promotions”) are a popular cause marketing strategy for engaging customers motivated to support a cause through their purchases. State charitable solicitation laws regulate CCV promotions by imposing specific registration, reporting, contract, and advertising disclosure requirements on businesses conducting these promotions. 

CCV Registration and Reporting  

Companies that conduct these promotions nationally must register as a “commercial co-venturer” in seven states.¹  The registration and reporting process comprises a few key components

• • Annual registration of the business. 
  • Filing of a surety bond.
  • Filing of the contract and/or solicitation notice
  • Filing of a campaign report.

See this chart of commercial co-venturer state registration and reporting requirements.  Note that the nonprofit beneficiary of these promotions must be registered to solicit in the states where the promotion is conducted, and also has certain reporting obligations regarding the promotion.  

Contract Provision Requirements

The agreement between the business and nonprofit must include several contract provisions, including sales and donation estimates and state-specific compliance language.

Advertising Disclosure Requirements

CCV advertisements must include specific information about how a customer’s purchase will benefit a nonprofit organization. These requirements are most clearly articulated in industry best practices such as the BBB Wise Give Alliance’s Standards for Charity Accountability.  Notably, advertisements must include the percentage or dollar amount of the purchase price that will be donated to the nonprofit. Vague language like “a portion of proceeds from the sale of each product will go to ABC Nonprofit” does not comply with the disclosure requirements.

There are compelling reasons CCV campaigns are a widely used marketing strategy. CCV promotions allow you to directly involve consumers in the charitable impact while buying products and services they are (typically) already planning to purchase.  A well-designed promotion can make a brand’s product stand out among competing products. According to Edelman’s 2023 Trust Barometer, 63% of people buy or advocate for brands based on beliefs and values.  Unlike some of the alternatives discussed below, CCV promotions are the only campaign structure in which the customer’s purchasing decision directly supports the nonprofit partner.  This may be why hundreds of businesses choose to engage in CCV promotions every year.  The compliance requirements are very manageable with a bit of guidance and support (including resources like this article and those available on the Engage for Good website). Moreover, several registration service providers offer CCV registration services so you can focus on making sure your promotion is a success.  

While there are compelling reasons to conduct CCV promotions, a few situations suggest that a CCV promotion may not always be the ideal structure. Consider the following scenarios: 

1. The total anticipated donation amount is relatively small and may not justify the compliance costs and burdens associated with the promotion structure. 
2. The promotion is national in scope, but your nonprofit partner does not typically fundraise nationally (and may not even be based in the U.S.) and may not be prepared to register to solicit nationally just to be the beneficiary of your promotion.²   

For these and other reasons, companies may want to explore alternatives to the CCV promotion structure.

CCV Promotion Alternatives

Below are a few of the most common CCV promotion alternatives that allow a business to still actively partner with a nonprofit in ways that engage its customers and the public and publicly communicate its support for an important cause that aligns with its brand values, but without being subject to CCV compliance requirements. 

“Proud Supporter” Corporate Donation 

The closest alternative structure to a CCV promotion is if a business commits a fixed donation amount to the nonprofit and is granted the right to include language on its product packaging or other point of sale marketing materials about its support of the organization. For example, “Our Company is proud to support ABC Nonprofit with a $50,000 donation to support the planting of 50,000 trees.”  

To avoid being subject to CCV regulation, the marketing language should not state or suggest that the customer’s purchase of the product will trigger a donation to the nonprofit. Nevertheless, the business can still publicly communicate its support for a cause important to the brand while financially supporting the organization and raising public awareness for the cause, which helps garner positive goodwill for the brand and publicly reflect its brand values and commitments.   

Point of Sale Customer Donation Campaign

With over $5 billion raised through customer donations at retail checkout counters, it’s no wonder point-of-sale fundraising campaigns are a popular and effective way for companies to raise funds for their favorite charitable causes. Some companies have even added incentives by offering coupons or discounts to customers who make donations at checkout.  

If this type of campaign is conducted in stores nationwide, the nonprofit must be registered to solicit contributions in all applicable states. In addition, companies conducting these campaigns online at checkout must register as a “charitable fundraising platform” in California (and starting in 2026, in Hawaii) if the campaign includes online customers in those states.   An agreement should be established with the nonprofit, granting the company permission to solicit contributions from the public on its behalf. The agreement should outline the agreed-upon terms and include the solicitation dates, the states where they will be conducted, and the timing for transferring the collected donations. 

Matching Gift Campaign

Matching gift campaigns are popular fundraising strategies used by nonprofits to incentivize public donations through contributions made by one or more “match donors.” In a traditional matching gift campaign, a match donor pledges to match public donations dollar for dollar, often up to a specified donation cap and/or for a set time period.   With this type of campaign, the amount of the pledge that the “match donor” must pay is contingent upon the total donations received from the public in response to the campaign.  Companies can be powerful multipliers of public support by partnering with nonprofits to match donations made by their supporters.  Companies can also match public donations raised through customer donation campaigns that the business conducts at checkout.

When conducting matching gift campaigns, ensure you accurately describe how the campaign works, including the campaign period, the match amount (e.g., dollar for dollar), the method of donating that will trigger the donation (e.g., “donations made at checkout at Company stores during Earth Month” or “donations made through a unique matching gift campaign URL, like Company.NonprofitWebsite.org”), and any donation cap (e.g., up to $50,000).  Read this article for additional legal considerations in matching gift campaigns. 

Free Action Campaign

Free action campaigns involve donating to a nonprofit, triggered by actions taken by customers or other members of the public.  A purchase or use of the company’s products or services is not required. Free action campaigns allow a company to creatively engage the public, including: (1) signing up for your newsletter; (2) watching a short video; (3) liking, commenting on, or sharing a social media post; or (4) taking a survey. These actions can help generate greater awareness of your company, the cause, or both.  

The structure of free action campaigns is similar to CCV promotions because donations are triggered by specific actions that must be tracked. As such, the structure of contracts and disclosures for free action campaigns is also comparable to CCVs in establishing transparency and accountability. Currently, companies engaging in these campaigns online must register as a “charitable fundraising platform” in California (and starting in 2026, in Hawaii) if the campaign includes online customers in those states. 

Find the Right Campaign Structure for Your Business

Companies have numerous creative options for partnering with nonprofits through financial support and public awareness, while also building consumer loyalty for their brand and directly incentivizing product sales in the case of CCVs. Don’t let concerns about CCV regulation prevent you from finding the right win-win partnership with a nonprofit partner. 

Determining whether a CCV campaign structure is the most effective option requires considering your business goals, parameters, and constraints, as well as a practical understanding of compliance requirements.  It may be more achievable than you think!  If you conclude that a CCV promotion is not the right fit, consider exploring another creative way to partner with a nonprofit that will engage your customers and the public, generating significant positive goodwill for your brand while supporting an important cause.

1 The seven states that require companies engaging in these promotions (the companies are defined as “commercial co-venturers”) are: Alabama, California, Hawaii, Illinois, Massachusetts, Mississippi, and South Carolina.  California’s CCV registration requirement is optional, in that companies can follow certain contract and accounting requirements in lieu of registering.  Moreover, California’s new law governing charitable fundraising platforms requires companies conducting online CCV promotions to register as a charitable fundraising platform instead.  Illinois’ charitable solicitation law does not define the term “commercial co-venture,” but the state has taken the position that companies engaging in charitable sales promotions must register as “charitable trusts” if they generate more than $4,000 donations in a 12-month period.  Read this article to learn how to evaluate what state laws apply to an online-only CCV promotion.

2 Nonprofits soliciting charitable contributions nationally must register in about 38 states.

The post Should My Company Engage in a Commercial Co-Venture (CCV) Promotion?[br] <i>Strategic Considerations and Alternatives</i> appeared first on Perlman & Perlman.

What is the solicitation of funds for charitable purposes?

Charitable fundraising is the act of asking for a gift, which may be in the form of cash or non-cash items, to benefit a charitable organization or charitable purpose. Although there is no standard definition of charitable purpose among the states that regulate charitable fundraising activities, it typically encompasses benevolent, educational, philanthropic, humane, scientific, patriotic, social welfare, advocacy, public health, environmental conservation, civic, or other charitable objectives.

It’s important to understand that the act of soliciting (i.e., asking for a gift) triggers the applicable regulations. Solicitations can occur in any form where a request is made for a gift to support a charitable organization or purpose. Examples include, but are not limited to telephone, face-to-face interaction, websites, online platforms, emails, direct mail, tickets for fundraising events, purchase of goods to benefit a charitable organization, raffles, bingo, sweepstakes, auctions, television or radio ads, and social media.

Who is subject to the charitable solicitation rules?

The “persons” (which can include an individual, organization, trust, foundation, group, association, entity, partnership, corporation, society, or any combination thereof) soliciting charitable contributions can generally be classified into four types: charitable organizations, professional fundraisers, professional fundraising counsels, and commercial co-venturers.

Charitable Organizations
A charitable organization is one that is established for a charitable purpose. Whether an organization has tax-exempt status or may receive tax-deductible contributions is a completely separate question from whether it is considered to be a charitable organization under state law. So, although “charitable organizations” certainly include 501(c)(3) tax-exempt organizations recognized as charitable by the IRS, it may also include other Section 501(c) organizations, other nonprofit organizations defined by state law, or, in some states, even for-profit entities. In essence, the important consideration is whether an organization engages in the solicitation of contributions to support a charitable purpose.

In some states, depending on the amount of total contributions or the nature of their activities, charities such as religious or educational institutions, hospitals, and membership organizations may be exempt from registration. Additionally, organizations that solely solicit via the Internet (and do not engage in any targeted activity directed to any state) may not be required to register in any state—other than in the state in which they are domiciled.

There are forty-one states plus the District of Columbia that mandate charitable organizations to register if they want to request donations from residents. The registration involves submitting a state registration form, providing a copy of the organization’s IRS Form 990 (if applicable), financial statements (which may need to be audited, depending on the organization’s annual revenue), copies of contracts with fundraisers and commercial co-venturers, and a filing fee. Additional documentation that might be required during the initial registration process includes a copy of the organization’s charter, bylaws, and IRS determination letter (if the organization qualifies for tax-exempt status).

Professional Fundraisers
A professional fundraiser (PFR), also known as a professional solicitor, paid solicitor, or commercial fundraiser, is a hired individual or firm that solicits contributions on behalf of a charitable organization in exchange for compensation. They may also have custody and control over the contributions received and play a role in managing fundraising campaigns. Professional fundraisers can include telemarketers, door-to-door solicitors, and others who solicit donations in person.

In forty-three states, PFRs are required to register, post a surety bond, file contracts with their nonprofit clients, and submit campaign financial reports. Additionally, many states require professional fundraisers to disclose their status as a paid solicitor before requesting a contribution.

Professional Fundraising Counsels
A professional fundraising counsel (FRC) is a paid entity that provides planning, consultation, advice, and design of solicitation materials on behalf of a charitable organization. They do not directly make solicitations. Generally, if an FRC is compensated based on a percentage of the funds raised or has control of contributions, it will be considered a PFR. Examples of FRCs include strategic consultants, direct mail consultants, and fundraising event planners.

Currently, thirty states require FRCs to register and file contracts. Some states also require them to post bonds and file campaign financial reports.

Commercial Co-venturers
A commercial co-venturer (CCV) is a for-profit entity that doesn’t typically raise funds but instead promotes that the purchase or use of its goods or services will support a charitable organization or charitable purpose. A typical example of a CCV is a retail store that pledges to donate a percentage of the purchase price or a specific amount per unit sold to a charitable organization.

Currently, up to seven states require some combination of registration, contract filing, posting of a bond, and/or filing of a campaign financial report. Additionally, around twenty other states regulate this activity by mandating specific contract terms or point-of-sale disclosures but do not require registration or contract filing by the CCV. Some states also require the charitable organization benefiting from the CCV promotion to file and/or report the CCV contract.

What about Internet solicitations?

Most state statutes require registration for internet solicitations that reach residents of the state. However, for a state to impose its regulations on an entity’s online solicitation activities, the entity must have “minimum contacts” with that state. States recognize that enforcing registration requirements for every internet solicitation is nearly impossible. In 2001, the National Association of State Charity Officials (NASCO) issued guidelines called the Charleston Principles. These principles are not binding laws, but NASCO encourages state charity regulators to use them as practical guidelines for applying their state laws to online fundraising activities.

The principles apply to any of the regulated entities that solicit contributions via the Internet (i.e., charities, PFRs, FRCs, and CCVs) and summarize the application of state registration and reporting regimes as follows:

Entities domiciled in a state are those whose main place of business is in the state. According to the Principles, having a physical presence in the state, like a branch or regional office, can also indicate state jurisdiction. 

Out-of-state entities that engage in non-internet activities requiring registration in the state (e.g., direct mail or inbound telephone solicitation) fall under state jurisdiction.

Out-of-state entities that solicit through an interactive or non-interactive website and either (a) specifically target individuals in the state or (b) receive regular contributions from the state on a ‘repeated and ongoing’  or ‘substantial” basis by the website solicitation.

The definition of ‘repeated and ongoing’ or ‘substantial’ contributions is left to individual states by the Principles. Currently, Colorado, Mississippi, and Tennessee have formally adopted numerical thresholds by regulation. In Colorado, an entity is considered to have received ‘repeated and ongoing’ or ‘substantial’ contributions if it gets at least fifty online contributions, or the lesser of $25,000 or 1% of its total contributions, in online contributions during a fiscal year. In Mississippi, an entity receives ‘repeated and ongoing’ or ‘substantial’ contributions if it receives at least twenty-five contributions or $25,000 in online contributions in a year. In Tennessee, an entity receives ‘repeated and ongoing or ‘substantial’ contributions if it receives at least one hundred contributions or $25,000 in online contributions in a year.

What are the disclosures that need to be made at the point of solicitation?

Some states require organizations to include specific disclosure statements on all written materials when soliciting donations. These disclosures must include information about how to obtain additional details about the organization and provide contact information for certain states. The requirements apply to charitable organizations and professional fundraisers. 

The disclosure notice should be included on all printed solicitations, as well as written confirmations, receipts, and contribution reminders. Examples of printed solicitations typically include direct mail, fliers, or newsletter solicitations. However, written solicitations can also include emails or requests for donations on an organization’s website, such as a donate button or a link to donate.

Despite seeming burdensome, these disclosures can guide potential donors to a specific representative within the organization or to the organization’s website for more information.

The post The What, Who, and How of Charitable Fundraising Compliance Registration and Reporting Requirements appeared first on Perlman & Perlman.

In this article I focus on recipient charities, i.e., a charity that receives donations facilitated by a platform or platform charity.  Although the law does not directly impose requirements on recipient charities, the new “good standing” requirement does have significant impact on recipient charities’ ability to receive funds through fundraising platforms. 

Recipient Charities 

The majority of 501(c)(3) public charities are likely to qualify as recipient charities.  If an organization receives donations through platforms such as Facebook, Blackbaud, GoFundMe, Benevity, or Classy, it is considered to be a recipient charity. 

The chief impact of the new law on recipient charities is the requirement that platforms and platform charities are only permitted to solicit, permit, or otherwise enable solicitations, or receive, control, or distribute funds from donations for recipient charities that are in good standing in California.  This means that if your organization is not in good standing in California, a platform may stop listing you as a potential beneficiary of funds and cannot send funds to your organization. 

Depending on how a platform has set up its good standing procedure, failure to be in good standing could prevent your organization from receiving online donations through the platform, not only from residents of California, but potentially from donors in any state.

How to Comply

To comply with the good standing requirement, fundraising platforms and platform charities receiving funds through the platform should ensure that with respect to each recipient charity: (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.  

Charitable fundraising platforms and platform charities are prohibited from facilitating donations for recipient charities who are on any of the following three lists pursuant to the good standing requirement:

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

What Can Charities Do Now?

Monitor your organization’s good standing status and ensure that you are submitting the required filings to remain in good standing.  We suggest that you check all three databases, even if you believe there is no reason to be out of good standing on any of these lists.  

Check your status in each of the three databases:

1. CA Attorney General Registry Verification
2. CA Franchise Tax Board Entity Status Letter | FTB.ca.gov
3. IRS Tax Exempt Organization Search | Internal Revenue Service (irs.gov)

For more information, see our recent articles on California’s new law governing charitable fundraising platforms:

California Issues Final Regulations Governing Charitable Fundraising Platforms

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

California Enacts New Law to Regulate Charitable Fundraising Platforms

The post Why it Matters if Your Nonprofit Organization is in “Good Standing” in California appeared first on Perlman & Perlman.

Here are some key elements to include in the written agreement and other important considerations as you move forward.

Term and Termination

Any contract, including one for professional services, should define the term of the agreement.   The term includes an effective date and a termination date.  The duration of a contract can vary, but if you aren’t sure the relationship will be a good fit, consider a shorter initial period of three to six months. A renewal can be quickly negotiated if the partnership is successful. 

Termination provisions allow either party to cancel the contract under specific circumstances.  Typically, professional services contracts allow either party to terminate upon written notice of thirty or sixty days.  It is also common to include a provision for termination “for cause,” in the event one party materially breaches the contract and fails to fix (or cure) the problem within a specified time frame.  

The organization should consider a provision for immediate cancellation in the event its good reputation is threatened.  This protection is important if the influencer’s unforeseen behavior garners bad press and reflects negatively on the charity through its association with the influencer. 

Code of Conduct

Consider including a code of conduct provision requiring the influencer to agree to online conduct that won’t interfere with the charity’s ability to fulfill its charitable endeavors, harm the charity’s fundraising efforts, or jeopardize the charity’s tax-exempt status.  The contract can require that the influencer refrain from featuring explicit music or language in its posts for the charity and prohibit the influencer from promoting other organizations in the same content created pursuant to its agreement with the charity.  

Intellectual Property

The contract should spell out which party owns any intellectual property (“IP”) developed as part of the agreement.  In addition to the usual grant of a limited license to use the organization’s logo and other trademarks, if the organization wants to secure ownership of any IP developed as part of the partnership, the contract should stipulate in clear terms that any IP created under the agreement (e.g., trademarks or copyrights) belongs to the organization.  Content can include photographs, images, videos, as well as other media created within the scope of the work done for the organization.  In some cases, an influencer may want any content that they develop and post on their own social media account to be their owned IP (excluding only the IP elements incorporated in the content that the charity may own). Ultimately, it’s most important to set clear expectations around IP ownership developed within the scope of the partnership to avoid future conflicts due to a lack of a meeting of the minds. 

Compensation

The contract should clearly state the compensation terms, including when payments are due and which expenses (if any) will be reimbursed.  It should make clear what is owed if the contract is terminated early.  If the influencer posts content encouraging people to donate to the organization, this could imply their status as a professional fundraiser, triggering charitable solicitation registration and reporting requirements in several states.  While there are certainly resources available to meet such requirements, the regulatory obligations it places on the influencer may discourage them from doing so, so be sure to have a clear discussion upfront if you are considering paying an influencer in connection with any fundraising efforts. 

Review and Approval of Content

While organizations may want to review and pre-approve any social media posts, many influencers will resist having their content, which are often primarily disseminated from their own social media accounts, managed in this way, particularly if they are doing so on a voluntary and uncompensated basis.  Your organization will need to strike a balance by being clear with its expectations upfront and thoroughly vetting the influencer’s content. One option is to pre-approve the general types of content, and provide accurate, vetted information that the influencer can use, while giving the influencer a choice of the ultimate details to be communicated.   This type of provision may require negotiation to reach mutually agreeable terms.

If a strict pre-approval process is not implemented, one other way to mitigate risk is to require that the influencer take down any posts that don’t meet the approval of the organization or contradict the vetted information provided to the influencer. 

FTC Rules 

The Federal Trade Commission (FTC) has published regulations on principles of advertising, also called the FTC Guides, which include disclosures influencers must provide to make it clear they have received compensation (in the form of money, products, and so on) for the content they are publishing.  The contract with an influencer should include the requirement to abide by the most recent FTC Guides.  

Representations and Warranties

The contract should include a representation and warranty from the influencer that the content they create will not infringe upon the rights of any third parties, particularly third-party intellectual property rights. This language is essential because it provides grounds for termination for cause as a material breach of the agreement.  

Templates for Efficiency

If the organization is contemplating several contracts, either with the one influencer or many, consider creating a template that can be adapted for different purposes.  For the same influencer, the organization can have an umbrella contract and attach different statements of work, depending on the social media campaign the influencer is working on. 

The rise of social media influencers already plays an important role for charities looking to expand their brands (charities are brands too!) and reach a wider audience to support their cause.  If your organization chooses to work with influencers, formalizing the relationship through a written agreement will help reduce ambiguity, ensure alignment, and minimize risk for your organization.

The post Does Your Nonprofit Want to Hire an Influencer?  What to Keep in Mind. appeared first on Perlman & Perlman.

Who is affected by the regulations? 

Charitable Fundraising Platforms (“Platforms”)

Charitable fundraising platforms include any person or entity that uses the internet to provide an internet website, service, or other platform to persons in California, and performs, permits, or otherwise enables acts of solicitation to occur.  The broad definition includes not only technology platforms specifically designed to facilitate online charitable donations, but also applies to many online retail websites and mobile apps that facilitate cause marketing promotions, invite customers to donate at checkout, or offer to make a donation in exchange for a free action taken online. 

Read this article to learn about the limited exceptions to the definition of “charitable fundraising platform,” and how the new law applies to platforms that meet the definition of more than one regulated fundraising category.  

Note that certain requirements vary based on the Solicitation Type(s) conducted on a platform.

Platform Charitable Organizations (“Platform Charities”)

Platform charities receive donations on platforms that are recommended or advised to be granted to another charitable organization.  

Recipient Charitable Organizations (“Recipient Charities”)

Recipient charities are those that are listed within a platform as a potential recipient of donations generated through the platform, and include donations received directly from the platform, or as a recommended donation or grant from a platform charity.

Persons Who are Sent Funds in Peer-to-Peer Charitable Fundraising 

A person may be required to register as a trustee with the California Attorney General’s office if they are sent funds from a platform as part of a charitable peer-to-peer fundraising campaign and cannot send the funds to the recipient charity within 10 business days of their receipt of the funds.

What do the regulations cover? 

The following is a high-level overview of the requirements covered by the Regulations, organized by date. For a more detailed summary, please see the article California Issues Final Regulations Governing Charitable Fundraising Platforms.

Effective March 26, 2024

Definitions (Section 314)

The definitions provide additional clarification to terms defined in the statute and create names for the different Solicitation Types described in the statute. 

Good Standing of Charities (Section 316)

The Regulations provide new procedures for implementing the “good standing” requirement, which affects when platforms can and cannot send funds to a recipient charity. 

Solicitation Disclosures (Section 317)

The Regulations expand on the disclosure requirements, particularly in peer-to-peer fundraising, and clarify that information on fees can be included in a hyperlink. 

Donations Held by Platform Users in Peer-to-Peer Fundraising (Section 323)

Persons conducting peer-to-peer fundraising campaigns that are sent donated funds from the platform or platform charity must send the donated funds to the recipient charity within 10 business days after receipt of the funds, or else register as a trustee with the California Attorney General’s office.

Effective June 12, 2024

Registration and filing requirements (Section 315)

The new registration and filing requirements applicable to charitable fundraising platforms become operative on June 12, 2024, and must be filed online.  

Effective January 1, 2025

Charity consent for solicitations (Section 318)

The regulations outline certain details that must be included in any agreement entered into between a platform or platform charity and recipient charity. 

Tax donation receipts (Section 319)

The regulation specifies that “prompt” issuance of tax donation receipts means no later than five (5) business days after the donation is made. 

Sending of donations to charities (Section 320)

The time in which platforms must disburse donations to recipient charities varies based on the Solicitation Type at issue, and whether the recipient charity consented or not to being included on the platform. 

Accounting of donations to charities (Section 321)

Certain information about the donations, including fees, and the activities that generated the donation, must be provided by platforms to recipient charities with the donated funds.

Information for Donors Regarding Donations Sent (Section 322)

Platforms must allow donors/users to find out whether their donations (or donations generated by their purchases or other activity) reached the recipient charity or alternative charity. 

Want to know more?

Previous articles covering the new California law governing charitable fundraising platforms provide additional information on its requirements. 

California Enacts New Law to Regulate Charitable Fundraising Platforms

Key Provisions of California Assembly Bill 488 Regulating Charitable Fundraising Platforms Take Effect January 1, 2023

How Does California’s New Fundraising Platform Law Affect Cause Marketing?

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

This article is for informational purposes only and is not intended to be an exhaustive summary of the new requirements.  Any persons or entities affected by the new law and regulations should consult with their legal counsel to ensure full compliance with the new requirements.

The post California Issues Final Regulations Governing Charitable Fundraising Platforms appeared first on Perlman & Perlman.

CALIFORNIA

Due to recent changes in California’s law, charities that are delinquent with the California Attorney General (AG), California Franchise Tax Board (FTB) or the Internal Revenue Service (IRS) are effectively being shut out of charitable fundraising platforms, including, but not limited to, Facebook and Blackbaud.  The law prohibits fundraising platforms from allowing charities that are delinquent with any of these agencies to fundraise or receive donations in California via their platform. This effectively shuts down a significant amount of online fundraising activities not just in California, but in all states, due to platforms’ compliance with the California law.  Moreover, since the agencies may take three to six months or even longer to process and confirm the correction of the delinquencies, this change is seriously impacting many charities’ ability to fundraise for an extended period of time.  

Delinquencies with the AG’s Registry of Charities and Fundraisers typically occur when a charity’s registration has expired and it has not submitted renewal documents, or because a deficiency has been identified upon the state’s review of the renewal registration.  In either instance, the delinquency status is effective immediately. The AG has changed its procedure and is no longer sending notices of deficiency with time to cure. Similarly, missed filings with the FTB will cause a charity to be included on its revocation list, which requires the platforms to shut down online solicitation or receipt of donations for the charity in California. 

It is imperative that all filing requirements in California are timely, complete, and accurately met.  If your organization is a California charitable corporation, or conducting operations in the State, it must submit annual filings with the FTB in addition to the annual filings with the AG’s Registry of Charities and Fundraisers.  All charities which solicit contributions in California, unless exempt, have an annual registration requirement with the AG. 

For more information on the California law, please see Has Your Organization Been Blocked by Charitable Fundraising Platforms? It is likely due to California’s new “Good Standing” requirement.

TENNESSEE

Effective July 1, 2024, charities soliciting in Tennessee must file a copy of any applicable commercial co-venturer agreement, along with a state form, at least five (5) business days before the promotion begins in the state.  Applicable commercial co-venturer agreements include those in which the territory of the promotion includes Tennessee.  

UTAH

Following a recent change to Utah’s Charitable Solicitation Law, effective May 1, 2024, charitable organizations will no longer be required to submit an annual registration with the Utah Division of Consumer Protection.  To this end, we have been notified by the Consumer Protection Division that as of March 29, 2024, it is no longer accepting registrations from charitable organizations.  With the elimination of this charitable registration requirement, Utah has also eliminated the requirement to pre-notify the state about charitable sales promotions taking place in Utah.  

The changes in Utah law also require Utah nonprofit corporations or foreign nonprofit corporations doing business in Utah to file their most recent Form 990 as part of their annual corporate registration filing process, unless the organization is exempt from filing a 990 with the IRS. This change will take effect in January 2025 and the Division will promulgate new Administrative Rules reflecting this change. 

Please see our recently updated charts

Charitable Solicitation Registration and/or Filing Requirements

Charity State Registration, Reporting and Contract Filing Obligations Relating to Commercial Co-venturer (CCV) Promotions

The post Charitable Registration Filing Updates for California, Tennessee, and Utah appeared first on Perlman & Perlman.

Nonprofit Hospitals

About 15 states exempt nonprofit hospitals from registration.  As a general matter, the exemption will apply to a nonprofit, charitable hospital regardless of where the hospital is licensed.  However, a number of states limit the hospital exemption to only those hospitals licensed within the state.  Additionally, in some states, the exemption is not available to hospitals that engage the services of a professional fundraiser.  Hospital foundations are exempt in only three states. 

Educational Institutions

About 33 states exempt educational institutions from registration.  Many offer a fairly broad scope of exemption that would apply to most colleges or universities accredited by a recognized regional or national accrediting body.  However, a number of states limit the exemption to those educational institutions which (a) are operating within the state only; (b) confine their solicitations to alumni, faculty, trustees, or the student membership and their families (meaning that universities that solicit contributions from foundations or corporations to support academic research, athletics, or other programs would not qualify for the exemption); or (c) qualify as a religious organization or are controlled or supervised by a religious organization.   

Religious Organizations

Most states exempt or exclude religious organizations from their charitable solicitation registration and reporting requirements. The scope of that exemption varies widely among states, both in how religious organizations are defined and in how those definitions are interpreted and applied. For some, the religious exemption provisions are broadly constructed, and exempt any “duly organized religious corporation, religious institution or religious society,” leaving the organization to determine if it falls within the exemption.  Other provisions are more narrowly drafted or applied, exempting only those organizations that are not required to file Form 990 with the IRS. These primarily include churches,¹ their integrated auxiliaries,² and ecclesiastical or denominational organizations.  Additionally, the exemption may be further limited to religious organizations that do not use the services of a professional fundraiser.  

Generally religious organizations that are required to file Form 990 with the IRS, will be exempt in some, but not all, states.  Many of those describe their mission as both religious and charitable, as together these constitute an expression of their religious faith and values.  Charitable services may include the provision of food, shelter, education, and medical support to vulnerable populations.  Oftentimes, religious organizations incorporate prayer and religious instruction into their programmatic work and require their employees to agree to an organizational statement of faith.  

Confirming Exemption from Registration

While a few states have a formal exemption review and approval process which includes submission of exemption forms and supporting documentation, a number of states have no formal process.  For these states, organizations may simply submit a letter advising the state of its own determination of exemption.  

A number of other states will consider hospitals, educational institutions, and religious organizations exempt based on their own determination, and may or may not require submission of a confirmation letter. It may be prudent, however, for organizations to submit a letter and have it noted in the state’s files even when not required. Doing so may help facilitate discussion with any professional fundraiser, fundraising consultant, or commercial co-venturer engaged by the organization, which must ensure that their charity clients or partners are properly registered or otherwise exempt from registering and may even insist upon receiving evidence of such registration or exemption in order to protect their own compliance obligations.  Further, funders and even individual donors may base contribution decisions on an organization’s compliance with registration requirements.  

Implications of New California Law Governing Charitable Fundraising Platforms on Hospitals, Educational Institutions, and Religious Organizations

We recently became aware of a number of nonprofit hospitals that were blocked from receiving donations through Facebook and other online fundraising platforms as a result of the platform’s implementation of a new “good standing” requirement which is part of California’s recently enacted law governing charitable solicitation, known as Assembly Bill 488 (AB 488).  Online fundraising platforms must block organizations that have a delinquent status with certain state and federal regulatory agencies from receiving donations through their platform.  The issue occurred even though the blocked hospitals met the statutory requirements for exemption from registration in California. A charitable organization’s failure to be in good standing in California has implications far beyond that state because platforms will generally block all online donations made to delinquent organizations from donors located anywhere, not just donations made by California residents.  

To learn more about California’s new “good standing” requirement, how it affects exempt organizations, and steps your organization can take to avoid or resolve a “good standing” issue, read Has Your Organization Been Blocked by Charitable Fundraising Platforms?

1 The term “church” includes churches, temples, mosques, and other houses of worship.

2 See https://www.irs.gov/charities-non-profits/churches-religious-organizations/integrated-auxiliary-of-a-church-defined.

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