Tuesday, August 25, 2015
Nonprofit State Registration: Know the Facts
Posted by Paul O'Grady
Many nonprofit finance teams have questions concerning state registrations: “Why do we have to register? Where do we need to register? How often do we need to register? What happens if we don’t register?” This is why Charity Compliance Solutions, sponsors at our latest Nonprofit Symposium in San Francisco, has helped us answer five major questions your nonprofit should be able to answer before it starts soliciting funds:
- When does my nonprofit need to register? Roughly 40 states have registration requirements that nonprofit organizations must comply with BEFORE soliciting for money. Soliciting constitutes any form of requesting money such as direct mail, phone calls, grant proposals, special events, raffles, email or website content. Any guidance or invitation to make a donation is a solicitation and each state has their own guidelines for such activities before their residents are contacted.
- What is the penalty for not registering? Each state has its own penalties for soliciting without a current solicitation license. These penalties can vary depending on how many solicitations were made, the length of time that a nonprofit was out of compliance, or even how much money the nonprofit received from the solicitations. Penalties may include fines from $500 to $50,000, the suspension or revocation of a license, imposing a voluntary compliance agreement or even requiring that the donations be returned to the donors.
- How do third-party vendors affect my nonprofit’s registration requirements? If your nonprofit uses a fundraising consultant, a professional solicitor or a commercial co-venturer to help raise funds the organization is responsible for making sure that these entities are also registered and compliant with state requirements. If your nonprofit is found to be using an entity that is not registered to solicit contributions, its license could be in jeopardy.
- True or false, my nonprofit only has to register in the state where it is located or incorporated? False. The truth is that a nonprofit is required to register in certain states all over the United States if any of that state’s residents or corporations are contacted in any way to donate money to the organization. Know the facts before you ask!
- How often do I have to renew my nonprofit’s registration? Your nonprofit’s state registration must be renewed annually! Many nonprofits think that once they register they are “good to go,” but each state requires an annual renewal form accompanied by your organization’s prior fiscal year’s financial documents. If a renewal is not submitted by the due date, monthly penalties begin to accrue. It is vital that your nonprofit keep an active registration status or properly withdraw your registration in order to avoid these unnecessary fees.
For more information on state registration requirements, or to get answers to any additional questions, please don’t hesitate to reach out to Michelle Boyer, Owner of Charity Compliance Solutions.
Paul graduated from University College in Galway, Ireland, in 1989 with a Bachelor’s degree in Economics and Political Science. He joined Armanino in 1995. Paul heads up the nonprofit practice group at the firm and also serves on the firm’s Accounting Standards Technical Committee. Paul is a member of the AICPA and the California Society of CPAs. Paul also has extensive for-profit experience.