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

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Below is a summary of the key tips provided by NASCO.

NASCO’s Tips for Charities:

1.  “Protect your brand.”  Charities should consider establishing a policy regarding who can fundraise on their behalf, and a process for potential fundraisers to seek authorization.

2.  “Research your charity’s online fundraising presence.” Third-party fundraising platform websites allow charities to carry out their own fundraising campaigns, but many websites also allow individuals to set up peer-to-peer fundraising campaigns without the involvement (or knowledge) of the charity.  (These websites typically partner with a tax-exempt donor-advised fund to receive and receipt donations, and then distribute the donation to the donor’s recommended charity.)  If your charity does not want to be included on a fundraising platform, contact them to request that your organization be removed from the website.

3.  Carefully research fundraising platform policies before using one.  Make sure you understand what kind of fees will be deducted, how donor information will be used by the website, when and how contributions will be sent to the charity, what type of fraud prevention measures are in place, and what kind of accounting a charity can obtain from the website.

NASCO’s Tips for Donors:

1.  “Make sure you are donating to a legitimate charity.”  Confirm that any email or text message solicitation you receive is legitimate by contacting the charity or visiting its website. Be wary of “look-alike” websites (i.e., a website created to look like a real charity’s website) and sound-alike charities (i.e., a charity with a name very similar to that of a reputable and well-known charity).  Before donating, research the legitimacy of a charity through websites like the IRS’s search tool of organizations eligible to receive tax-deductible contributions, Guidestar, and various charity watchdog websites.

2.  Take appropriate steps before initiating or donating to a peer-to-peer fundraising campaign.  Individuals who want to set up a peer-to-peer fundraising campaign should contact the charity to obtain permission to use their name beforehand. In addition, donors should make sure that the donation will go directly to the charity and not to the individual supporter. Donors should make sure they understand what fees will be charged and/or taken out of the donation, and how their personal information will be used by the website.

NASCO’s Tips for Fundraising Platforms:

1.  “Conduct basic due diligence to discourage potentially fraudulent uses of your platform.”  This includes verifying on the IRS website that charities included on the platform are tax-exempt and eligible to receive tax-deductible contributions, and that the charities are registered to solicit donations wherever they are required to do so.  Confirm that any person claiming to work for a charity actually does, and that any bank account information provided is that of the charity and not of any individual.

2.  Obtain written permission from each charity before collecting funds for it. NASCO notes that “[a]t least 38 states require express/written permission from a charity before its name is used in connection with a solicitation.”

3.  Educate charities and their donors who use your website by having clear and transparent terms and conditions for using the platform.

• Clearly disclose what type of vetting will be done before a charity can participate on the website.  Fundraising platforms should make sure this is clearly set forth in their FAQs or other webpage describing how the platform works.
• Be transparent about donation transfer policies and practices. This includes any transaction fees, the portion of the donation that the charity will actually receive, any minimum thresholds that must be donated before funds will be disbursed, and how often funds will be transferred.
• Promptly comply with any request from a charity to be removed from the website. Include contact information specifically for charities to ask questions or report fraud.

4.  Implement anti-fraud measures.  Establish and implement policies and procedures that will help detect and deter fraud, and review and fix flaws in the procedures as they become known.

5.  Be aware of, and comply with, any applicable fundraising regulatory requirements. Depending upon the type of services provided and how your fundraising platform works, “[y]ou may be classified as an unregulated vendor, or a moderately regulated commercial co-venturer or professional fundraising consultant/fund-raising counsel, or a more actively regulated commercial fundraiser/ professional solicitor.”  Make sure you understand your legal status, and comply with any applicable registration, reporting, and contract requirements.

NASCO’s tips on internet and social media fundraising provide plenty of guidance for charities and fundraising platforms to consider, but one issue it does not directly address is when a state has jurisdiction over a charity or fundraising platform whose fundraising activities are carried out on the internet.  Stay tuned for my next blog, which will review state charity regulators’ current guidelines on when state registration and reporting requirements are triggered by internet-based fundraising activities, and highlight some of the legal and practical considerations that nonprofits, fundraisers, and fundraising platforms face when trying to apply them.

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