Nonprofit Charitable Solicitation Laws

In the nonprofit world, fundraising is as inevitable as death and taxes in the for-profit world. Nonprofit leaders must ensure a strong fundraising plan if their organization is to accomplish the good that is intended and fulfill its mission. While there are many fundamental principles of fundraising that must be employed to ensure success, the #1 unscientific basic truth of fundraising that was reiterated throughout graduate school is this-- Organizations must earn trust to get money. Period.

So with all the charities out there asking for donations, how does your organization assure the public that you and your cause are, in fact, trustworthy? Luckily, most states have taken the first step in recognizing and protecting the public's trust through the implementation of charitable solicitation laws.

Many nonprofit organizations, especially small startup nonprofits, are unaware of the charitable solicitation laws that states have designed and adopted to protect donors, the general public, and charities themselves from fraud. Generally, these laws require charities and their fundraisers to register with the state, describe their fundraising activities, file financial documents, and pay a fee that covers the administrative expenses of monitoring charities. An organization must remain in compliance with the solicitation laws in each and every state in which they will make requests of the public. There are some exceptions to these statutes, particularly regarding religious organizations, so it is imperative that you abreast of the laws in each area where you will conduct fundraising.

The registration rules are relatively straightforward, except when it comes to fundraising over the Internet, because the law is not yet settled with respect to this issue. Although some argue that solicitation laws apply to Internet fundraising as well as to telephone and mail solicitations, others suggest that simple requests for funds that appear passively on a Web site are quite different from active telephone and mail solicitations. The National Association of State Charities Officials (NASCO) has promulgated the Charleston Principles, which arrive at a middle ground, but these are recommendations to other state charity officials, not laws. Nonprofit organizations should check with their legal advisors and with charity officials in their states to determine how to handle the issue of registration for Internet fundraising.

Possibly even more important to your legitimate organization is the recognition of the penalties imposed for violation of these statutes. In my state, Florida, the law imposes a penalty of $1000 per violation. This means that for every person you asked for a donation, whether they actually donated or not, you would have to pay a fine in the amount of $1000. For an organization that is doing their best in these tough economic times to remain funded and retain the ability to provide critical services this could be a huge hit in the pocketbook, thus remaining in compliance is essential.