Fundraising is a core component of any nonprofit. It enables you to cultivate a community, work toward your cause, and create new mission initiatives. Picture this: you’ve gathered your resources and supporters into the beginning stages of a nonprofit organization. You’re all fired up, and inspired to start fundraising for your organization’s cause. But how do you get started with nonprofit compliance laws?
Don’t let the complexities of government nonprofit compliance requirements hold you back from embarking on your nonprofit’s fundraising journey! Although this is not an exhaustive list, this article can serve as a guide for what to look out for when your nonprofit is just starting out.
Charitable Solicitation Registration
Your nonprofit likely has received its 501(c)3 charitable organization tax exempt status. However, this is a federally recognized status. But what about recognition at the state level? Almost all states require some form of registration prior to allowing your organization to solicit donations from their residents.
This process of state registration is called charitable solicitation registration, and the process varies from state to state. Depending on how far your fundraising campaign reaches or how large your donor community is, this process can vary in intensity, as you technically need to register in all states where you’re fundraising or accept donations from and that require registration.
Don’t skip out on this step, or you could end up with a consequences that outweigh the low cost of registration, such as:
- Fine and late fees
- Civil and criminal charges against your leadership
- Revoked tax-exempt status
- Losing the right to solicit funds
- Loss of funding and donations
Because raising money for your cause is crucial for working toward your nonprofit’s mission, be sure to register for charitable solicitation in the states you need—losing this privilege would mean losing the opportunity to serve your community and cause.
The internet has vastly expanded fundraising opportunities for nonprofits, helping reach more people than what was previously possible. However, it also expanded their need to register for solicitation.
Some states require you to register for solicitation if you accept online donations from their residents. Because online fundraising campaigns are so far reaching, this creates compliance concerns because you could potentially receive donations from states where you are not registered. Because of this, the best practice is to register for charitable solicitation in all 50 states.
, there are a few ways to ensure you’re complying with state registration requirements. You may not need to register in all 50 states. Because state level compliance registration laws are ever- changing, try to register in the jurisdictions where there are solidified requirements. This can be hard to keep track of, so be sure to follow up with charitable registration experts who can help verify your nonprofit’s compliance needs.
According to Labyrinth’s fundraising requirements guide, there are a few ways to ensure you’re complying with state registration requirements. You may not need to register in all 50 states.
Because state level compliance registration laws are ever- changing, try to register in the jurisdictions where there are solidified requirements. This can be hard to keep track of, so be sure to follow up with charitable registration experts who can help verify your nonprofit’s compliance needs.
Online fundraising is a fantastic way to reach a large audience, specifically because it can help you engage remote supporters of your cause. As a part of online fundraising, email marketing also has a broad reach, which leads to similar and more complex regulations regarding charitable solicitation.
Email can be a helpful tool to market your nonprofit, update donors, and engage your community, but there are a few laws to keep in mind when engaging donors via email marketing:
- The CAN-SPAM Act. This law bars commercial businesses and nonprofits from sending email solicitations without first receiving consumer consent for the messages. The act requires that all consumers must “opt in” to receive solicitations, so be sure that any of your forms that collect email addresses also clearly state that you may send emails in the future.
- The European Union’s General Data Protection Regulations. Your US-based nonprofit is responsible for following the EU’s data regulation if citizens of the EU interact with your website, emails, or donate to your cause via those platforms. Under this act, users must “opt in” to have data stored, they must be able to revoke their opt in at any time, and they must be notified within 72 hours of a data breach.
- The California Consumer Privacy Act. This act sets similar regulations to the EU’s GDPR and targets for-profit organizations that sell consumer data. However, if any of your third party service providers fall under California’s jurisdiction, be sure they are compliant.
Take care to follow the regulations laid out in the pieces of email legislation listed above. These three are currently the most impactful email-related regulations, but it’s important to stay on top of further developments. Look for third party email marketing providers, like Feathr, for your email marketing that prioritize data security and legislation compliance.
Games of Chance
Many states and local jurisdictions require registration for games of chance—even a community’s casino night or local nonprofit’s charity auction are required to register with their state prior to hosting their events. Most states require an application for a gaming license to host a game of chance based event, but be sure to look up your own state’s policy.
Common fundraising events that fall under the game of chance category include:
- Live and silent auctions. Whether it’s hosting online, as a rallying event, or with silent bidding, auctions are ultimately a chance for donors to win a prize.
- Raffles. Although these are easy to set up, because donors contribute with the idea that they may win a prize, this is considered a game of chance.
- Paddle raise. This simple activity can help make your luncheons more interactive, but still requires a gaming license.
- Casino night. This popular theme can really bring in a crowd to your fundraising events, so be sure you have a license prior to hosting this theme.
In some states these donations made at these types of events are not tax-deductible, so to practice due diligence, be sure to let your donors know prior to their generous contributions to your cause. Some states do allow it to be marked down as charitable donations for the nonprofit’s taxes, but others require the funds to be held in separate bank accounts.
Prior to planning any of these events, check with your state Attorney General or Secretary of State to verify what licenses, permits, or accounting requirements you need to fulfill.
It can be difficult to keep up with the various state requirements for nonprofits, but now you’ll be more prepared when it comes to kicking off your organization’s initial fundraising. Try to be proactive when it comes to federal and state fundraising regulations. Verify what state requirements your organization falls under, and be sure to check in with an expert before starting your charitable solicitations. Although this guide didn’t detail specific state guidance, now you can feel confident about asking for donations after you’ve fulfilled all the government requirements.