Before you start soliciting donations for your new nonprofit, you have some paperwork to do. Most nonprofits need to register for charitable solicitation. Many states require your organization to file with the state before you can ask for donations from state residents.
Also known as fundraising registration, the process licenses your nonprofit to solicit funds within certain jurisdictions. You submit paperwork to state charities bureaus, which are usually overseen by the Secretary of State or State Attorney General, depending on the location.
Why Charitable Solicitation Registration Is Important
By law, your organization must file for charitable solicitation registration. Many grant applications and other funding sources can't be completed until you have finished registration and been approved to solicit donations.
By registering, you are also being transparent about your intent. Trust is vital to the success and longevity of your organization. Donors understandably expect accountability when it comes to their money. By registering to solicit, your nonprofit shows itself to be a trustworthy charitable organization to donors.
Donation Solicitation Requirements
Nonprofits seeking funds must comply with charitable solicitation requirements, which vary from state to state. Despite the variances, there are some common requirements for registering your fundraising efforts for your nonprofit.
Charitable Solicitation Registration Statement
The charitable solicitation registration statement is your first step. This is your request to your state to be able to solicit charitable and tax-deductible contributions.
Charitable solicitation registration statements consist of a form that requires that you list your organization's:
- Physical address
- Web address
- Federal tax-exempt status
- Names and addresses of executive personnel
- Fiscal year
- Financial information from IRS Form 990 or 990-EZ
If you haven't yet filled out Form 990, you will need to provide a good faith estimate for most of your nonprofit's recent fiscal year. You must also agree that your organization complies with the U.S. Patriot Act.
List of Officers and Directors
You will likely need to provide a complete list of your nonprofit organization's officers and directors as part of the fundraising registration.
Form 990 Nonprofit Taxes
Form 990 and Form 990-EZ are forms that many tax-exempt organizations must submit to the IRS annually. The information on this form is required by section 6033(a)(1) of the Internal Revenue Code. This code requires all organizations exempt from taxation under section 501(a) to file an annual return. The return lists items of gross income, receipts, disbursements, and other required information.
Determination (Approval) Letter
When you file for the ability to solicit donations, you must also provide your determination letter from the IRS stating that you're approved as an exempt organization.
You will have to pay a filing fee to the respective state agency or agencies when you file your charitable solicitation registration. Fees vary among jurisdictions. They are often calculated based on total gross revenue from the prior year or the number of contributions received in the jurisdiction.
How to File
Currently, many jurisdictions require paper filing of the initial and renewal charitable solicitation registration. However, some jurisdictions have switched to filing via email or fax.
Is It Necessary to File in Every State?
Yes. Regardless of how you're asking for donations — be it via your website, a charitable platform, social media, phone calls, snail mail, emails, texting, or simply asking in person — these actions are considered soliciting donations.
The internet makes asking for donations as simple as the click of a button. However, doing this poses compliance issues. Simply asking for donations is considered soliciting, and this means your organization must register in any state potential donors are located.
Currently, you must file in every jurisdiction where you wish to solicit and collect funds for your organization. In other words, if your nonprofit is in Houston, but you want to receive an online donation from someone in Milwaukee, you'll have to file in Wisconsin as well as Texas.
The Unified Registration Statement (URS) was intended to streamline the registration process throughout the nation, but many jurisdictions still require supplemental information. That means it's still simpler to just file in each state with the specific forms available through the state government agency that regulates fundraising. You can find the state government offices handling the various jurisdictions on the National Association of State Charity Officials' website.
Can You Solicit Funds While Your Exempt Status Is Pending?
You might be able to solicit and accept donations before receiving your determination approval letter. However, most states require you to have registered prior to asking for donations. This also applies to online solicitations.
Consequences of Failing to File for Charitable Solicitation Registration
If you solicit donations before registering, the consequences can be severe. This is especially true if you fail to register after you receive funds. Here are some consequences of failing to file for charitable solicitation registration:
- Criminal or civil action against directors and officers
- State fines, penalties, and late fees
- Revocation of tax-exempt status
- Denial of the ability to solicit funds
- Damaged relationships with donors and those disbursing grants
- Lost grants and donations
- Negative publicity
Though charitable solicitation registration is time-consuming, it's a necessary task that will keep your nonprofit in compliance and lead to transparency for your donors. Fundraising registration may take work, but the investment is well worth the effort.
Starting a New Nonprofit?
If you're starting a nonprofit, Swyft Filings can help. We assist with filing your nonprofit paperwork. For information about forming a nonprofit, check out our simple guide on How to Start a Nonprofit in 8 Steps. If you're ready to get started, we can help you file your nonprofit paperwork, too.