Tax-Exempt Organizations Alert D.C., Maryland And

September 2014 Updated August 2018

D.C., MARYLAND AND VIRGINIA CHARITABLE SOLICITATION REGISTRATION REQUIREMENTS

I. Overview  Contact by telephone; A nonprofit organization relies on the  Sale of tickets to fundraising events, generosity of many people in order to such as gala dinners or charitable carry out its mission. However, potential auctions; and donors are understandably wary of  Merchandise or subscriptions where unscrupulous solicitors who try to take any statement is made that the advantage of the public support of proceeds will be donated toward a charitable institutions. charitable purpose.

In order to protect the public from Your organization should carefully unethical fundraising, most states, as well examine its donor list to determine where as the District of Columbia, have laws your contributors are located. If the regulating the solicitation of charitable organization is sending mail or making funds. Typically, these statutes require a telephone calls to even one resident of a nonprofit organization to register with the state, the organization or its legal counsel state government before soliciting funds should examine whether it is required to from the state’s residents, unless the register there. organization qualifies for certain well- defined exemptions. The registration requirements differ from jurisdiction to jurisdiction, but as a Individual state laws define what general rule they require information constitutes a “solicitation” somewhat regarding: differently, but generally a solicitation means any request for a contribution.  The organization’s purpose and Requests can come in many different mission, forms, including:  The date and place of incorporation,  The organization’s articles of  Verbal or written requests; incorporation and by-laws,  Mailings, postings, print  Addresses and contact information advertisements and pamphlets; for the directors and officers of the  Announcements to the press, over the organization, as well as those who radio or on television; will be directly soliciting funds, September 2014 Updated August 2018

 A copy of the organization’s Form application. Some organizations, 990, and including those that receive less than  The methods used in conducting the $25,000 in contributions annually (see solicitations. below), are exempt from these registration requirements. Organizations are expected to update their registration on a yearly or biennial Registration Requirements: To get a basis. basic business license, a nonprofit must first ensure it is registered to do business Certain organizations are exempt from in D.C. with the Department of Consumer states’ registration requirements. The and Regulatory Affairs’ (DCRA) exemptions vary, but often solicitations Corporation Division. Organizations by educational institutions and religious incorporated in another state, but doing organizations are exempted from business in the District, must register as registration, as well as organizations foreign corporations. For purposes of the whose total collections do not exceed a rules, “doing business” includes having specified dollar threshold. an office, conducting programs, hiring

employees, or soliciting contributions This alert provides an overview of the within the District. charitable solicitation requirements of the District of Columbia, Virginia, and In order to register your nonprofit Maryland. It identifies the documents an corporation, you must submit the organization will need to submit, the following to DCRA: thresholds for qualifying for exemptions, and outlines the renewal processes.  The organization’s articles of Organizations that solicit contributions incorporation, and from donors residing in the entire metro  The name of the organization’s area must determine if they are required registered agent. to register in all three jurisdictions. The organization’s registered agent is the person that receives legal notices on II. D.C. Requirements behalf of your organization. The agent

must have a presence in D.C. and have a The District of Columbia government physical D.C. address, but need not be an requires all entities doing business in individual; a corporation may serve as a D.C., including nonprofit organizations, registered agent.1 If your business uses a to obtain a basic business license. In trade name, you will need to register that addition, charitable organizations must name with DCRA as well. obtain a license to solicit charitable contributions. As a next step, your organization must register with the Office of Tax & To assist charitable organizations, the Revenue by filing Form FR-164 and D.C. government has incorporated the Form FR-500, so that the organization application for a charitable solicitation can pay payroll and sales taxes, if license into the basic business license necessary. If your organization is based

1 For a small fee, certain companies will serve as registered agents for out-of-state corporations. September 2014 Updated August 2018 in the District, you will also need to  The solicitor does not receive in hand obtain either a certificate of occupancy or more than $25,000 in contributions a home occupancy permit for your office during a calendar year; space.  The solicitor is unpaid for his or her services; and Once you have taken these steps, your  No part of the contributions the organization can now complete the solicitor collects are paid to any application for a basic business license. officer, member or solicitor or used To file an application, applicants first for their benefit. must complete the Basic Business If the individual your organization hired License EZ Form, and should submit the to solicit does not have a card, they may following along with the form: obtain one when your organization registers.  A Clean Hands Self-Certification;  The tax I.D. number from the D.C. The filing fee for BBL-EZ is $412.50 for Office of Tax and Revenue; a two-year license, or $720.50 for a 4-  A Certificate of Occupancy for the year license. Once the organization has premises your organization occupies; registered, it must display its certificate of  A copy of your organization’s IRS registration in a prominent place, and determination letter; renew its registration every two years.  A Certified Resolution from the board Renewal is due 30 days prior to the authorizing the registration; and expiration date of the previous license.  A list of any individuals who will be soliciting on the organization’s Exemptions: Not all organizations are behalf, along with their addresses.2 required to comply with the registration process in order to solicit funds within the District. The D.C. Code exempts four Solicitor Information Cards: In the types of organizations that solicit funds District of Columbia, any individual who from registration: solicits and receives custody of charitable contributions from the public must  Small organizations that do not raise register with the District government and more than $25,000 per year from D.C. obtain a solicitor information card. This residents; requirement includes those individuals  Organizations that solicit donations who are working for an organization that only from their members or members’ has registered. families;  Organizations that only engage in Solicitors are exempt from the workplace giving campaigns; and registration requirements if the following conditions are met:  Religious organizations that solicit for educational or religious purposes.

To qualify for the small solicitation exemption, the individuals doing the

2 In addition, each professional fund raiser and contract made by or on behalf of the applicant professional solicitor must provide a copy of any with the professional fund raiser or solicitor.

September 2014 Updated August 2018 fundraising may not be paid for their contributions from the Commonwealth’s services and no part of the contributions residents. Nonresident organizations are may be paid to any officer, member, or subject to the same registration solicitor, or used for their benefit. requirements as organizations incorporated in Virginia. The membership exemption applies if the governing body of the organization To register, applicants must submit the approves the solicitation. The Virginia Registration Statement for a organization may solicit from any Charitable Organization with the member or the family of any member, following attachments: however, an individual cannot be considered a member simply because the  A copy of the organization’s articles person previously donated to the of incorporation and by-laws; organization.  A copy of the organization’s IRS determination letter; If an organization wants to claim a  The organization’s Form 990 from workforce exemption, the solicitation the prior fiscal year or certified must be approved by the employer and audited financial statements for the the solicitation must be carried out under prior fiscal year; the supervision of the employer and only o If the organization files Form at the workplace. 990-N, it may file a copy of a balance sheet and income and Finally, religious organizations may also expense statement verified under be exempt from registration. In order to oath or affirmation by the qualify for this exemption, the treasurer of the organization in organization must: lieu of a Form 990. If the organization has no financial  Submit a certified copy of its IRS history, it should include its determination letter declaring their board- approved budget for the organization to be exempt under current fiscal year. Section 501 of the Internal Revenue  The names, addresses and titles of the Code; and organization’s officers, directors and  An affidavit stating that the tax- other executive staff; exemption is still in effect as of the  A list of each professional fundraiser or date of submission. solicitor, other than employees, who

Organizations seeking the religious will be working for the organization exemption may not solicit contributions and a copy of any contracts made with until after their application for exemption professional fundraisers; has been approved.  A statement detailing the percentage of the organization's income spent on III. Virginia Requirements fundraising; and  A statement describing the general In the Commonwealth of Virginia, purposes for which the solicited organizations are required to register with contributions shall be used. the Virginia Department of Agriculture and Consumer Services before soliciting September 2014 Updated August 2018

Organizations are required to re-submit  Persons requesting contributions the Virginia Registration Statement for a solely for the relief of a specified, Charitable Organization each year to named individual, where the gross inform the Commonwealth about their amount is turned over to that activities. The deadline for this individual; submission is the fifteenth day of the fifth  Charitable organizations that do not calendar month following the end of the intend for the total amount of the organization's fiscal year. Thus, an contributions it receives from both organization using the calendar year as its Virginia residents and nonresidents to fiscal year would need to file by May 15th. exceed $5,000. Organizations are not required to o If the organization has a financial resubmit their charter, by-laws, IRS history, the total amount of the determination letter or contracts, unless actual contributions it received they have been altered. from the public each year, for the last three years, must be less than If an organization has prior financial $5,000. These funds must also be history when it first attempts to register, solicited by unpaid individuals; it must pay the $100 registration fee and  Organizations that only solicit from an annual fee, which is determined based their members. To qualify as a on the total contributions the organization member, the organization must confer received in the previous year. An some benefit to the individual and the organization without financial history is individual must have the right to vote only required to pay the $100 registration for and hold office in the fee. organization; Thereafter, an organization is required to  Organizations that do not have a pay the appropriate annual fee when it physical office in Virginia, but solicit resubmits its registration statement. from outside the state, and also have a chapter, branch or affiliate within Level of Charitable Annual Virginia that has already registered; Contributions Fee  Certain tax-exempt healthcare Less than $25,000 $30 institutions; $25,000 but < $50,000 $50  Any church or association of $50,000 but < $100,000 $100 churches that is primarily operated for $100,000 but < $500,000 $200 non-secular purposes, where no part $500,000 but < $1 million $250 $1 million and above $325 of the net income of which directly benefits any individual; Exemptions: Virginia exempts a number  Tax-exempt nonprofit organizations of types of organizations from its that only solicit contributions through registration requirements. The most grant proposals submitted to for- common used exemptions available to profit corporations, tax-exempt charitable groups are: nonprofit organizations and private foundations.  Educational institutions accredited by the Board of Education or by a Organizations that qualify for the church recognized national or regional exemption are not required to submit any accrediting institution; documents to the Department of September 2014 Updated August 2018

Agriculture and Consumer Services. In  A statement detailing how the order to qualify for any other exemption, contributions to be solicited will be an organization must file the Virginia used. Exemption Application for a Charitable or Civic Organization and submit a onetime If an organization’s contributions are at fee of $10, along with required least $300,000, but less than $750,000 per documents listed on the form. Once year, the group must submit a financial granted, the exemption remains in effect review performed by an independent so long as the organization solicits in certified public accountant. If an accordance with its claim for exemption. organization’s contributions are at least $750,000 per year, it must submit a Disclosure Requirements: Nonexempt formal audit performed by an organizations are required to include a independent certified public accountant. disclosure statement on all written solicitations and receipts. The statement Organizations must pay an initial should inform contributors that a registration fee and, thereafter, an annual financial statement for the organization is fee each year. Both of these fees are available from the Department of based on the gross level of charitable Agriculture and Consumer Services upon contributions the organization received request. from any source.

IV. Maryland Requirements Level of Charitable Annual Contributions Fee In Maryland, all organizations are Less than $25,000 $0 required to register with the Charitable $25,000 but ≤ $50,000 $50 Organizations Division of the Office of $50,001 but ≤ $75,000 $75 the Secretary of State before soliciting $75,001 but ≤ $100,000 $100 within Maryland. Organizations must $100,001 but < $500,000 $200 submit Maryland’s Registration $500,001 and above $300 Statement (Form COR-92). Applicants will also need to submit: Organizations must update their registration within six months of the end  A copy of the organization’s articles of the fiscal year. They should submit: of incorporation and bylaws;  A copy of the organization’s IRS tax  The Annual Update of the determination letter; Registration Form;  A signed copy of the latest IRS Form  The annual filing fee; 990;  The most recent Form 990 (or, if your  The names and addresses of the board organization files the 990-N or is not of directors; required to file the 990, the Form  A copy of all contracts with COF-85); professional solicitors or fundraising  A list of the current board members; counsel, other than employees located  Any new fundraising contracts; and in the State of Maryland;  A financial review or audit if the  A statement describing the purpose organization’s contributions exceed for which the organization was $300,000 and $750,000 respectively.

organized; and September 2014 Updated August 2018

Exemptions: Maryland exempts  A copy of the organization's bylaws organizations that engage in certain types showing members’ rights; and of soliciting from its registration  A statement of who will be requirements. In order to qualify for any solicited. exemption, an organization must not employ a professional solicitor. In An organization seeking an exemption on addition, to be exempt from registration the grounds that it only receives in Maryland, an organization must: contributions from for-profit corporations and private foundations  Be a tax-exempt religious should submit its latest Form 990 and organization, parent organization of a financial documents to establish its religious organization or school income sources. affiliated with a religious organization; If an organization received less than  Solicit contributions only from its $25,000 in total contributions from members. To qualify as a member, Maryland residents and nonresidents in the organization must confer some the most recent completed fiscal year, or benefit to the individual and the if it is seeking exemption on the grounds individual must have the right to vote of fundraising for a named individual, it for and hold office in the must submit the Exempt Organization organization; Fund-Raising Notice. This notice must be resubmitted annually.  Solicit contributions for a specific, named individual, where the gross In any year that an organization receives amount is delivered to that individual; more than $25,000 or hires a professional  Receive less than $25,000 in annual solicitor, it will need to register by contributions from Maryland submitting an Annual Update of the residents and nonresidents; or Registration Form.  Only receive contributions from for- profit corporations and private Disclosure Requirements: Nonexempt foundations. organizations are required to include a disclosure statement on all written To qualify for a religious exemption, the solicitations and receipts. Each organization must submit to the disclosure statement should include: Charitable Organizations Division:  A statement that a copy of the current  A copy of the IRS determination financial statement of the charitable letter designating the organization as organization is available on request; tax exempt;  The name of the charitable  The organization's articles of organization and the address and incorporation; and telephone number where requests for  A document explaining the mission of a copy of the financial statement the organization. should be directed; and  A statement that, for the cost of An organization seeking a membership copies and postage, documents and exemption must submit: information submitted in compliance with the Maryland Solicitations Act September 2014 Updated August 2018

are available from the Secretary of person and solicitations sent through the State. U.S. mail. Therefore, an organization must register in all applicable states to V. Unified Registration Statement which it sends email solicitations.

It can be burdensome and inefficient for However, different rules apply to organizations soliciting contributions in “passive” solicitations, such as when an more than one state to fill out a different organization features a “donate” button form for each state. Recognizing this, on its website. In many cases, an charity officials from several state organization will accept donations from governments created the Unified donors in states where it is not registered, Registration Statement. The Unified but does not actively reach into that state Registration Statement is now accepted to solicit donations. by a majority of the 40 jurisdictions that require organizations to register in order To address this situation, the National to solicit, including Maryland, Virginia Association of State Charity Officials and the District of Columbia. have adopted a set of non-binding principles (known as the Charleston Typically, the Unified Registration Principles), which provide that if a Statement can be used in lieu of the state- charitable organization has a passive specific form, and thus is most useful donation link on its website – meaning when an organization will be soliciting that the donor must come to the website regionally or nationally. For example, in order to donate – the organization will Maryland and Virginia allow not be considered to be soliciting organizations to use the Unified donations in the donor’s state of Registration Statement rather than the residence. state-specific forms. However, the organization cannot use However, some jurisdictions have more other means of communications to stringent registration requirements than individuals in the state to induce them to others and therefore may require visit the website in order to donate. supplemental forms in addition to the Additionally, the registration requirement Uniform Registration Statement. For will be triggered if the amount of example, D.C. requires applicants to donations an organization receives from a complete a basic business license particular state are “repeated and application in addition to the Unified ongoing” or “substantial.” The Principles Registration Statement. define “repeated and ongoing” or

“substantial” as meaning that the To use the Unified Registration organization received contributions Statement, simply fill out the Unified within the fiscal year that are of sufficient Registration Statement, attach the state- volume to establish that the donations are specific attachments and submit. regular or significant, as opposed to rare, VI. Online Solicitations isolated, or insubstantial.

Generally, electronic solicitations are The organization will also trigger the subject to the same rules that apply to in- registration requirement if it subsequently re-solicits a donor who September 2014 Updated August 2018 contributed via its website, unless the organization is otherwise exempt from registration.

In some, but not all, states, if the organization uses an intermediary such as Network for Good to accept and process online donations, the organization may not be required to register, as long as the intermediary is registered. In other states, the fact that contributions are being made on the organization’s behalf is sufficient to require registration.

However, the Charleston Principles suggest that “states should consider whether, as a matter of prosecutorial discretion, public policy, and the prioritized use of limited resources, it

would take action to enforce registration requirements as to charities who do not independently” solicit funds.

VII. Additional Resources

You may find the following helpful:

 D.C. Bar Pro Bono Center, Webinar: Soliciting Charitable Contributions in DC, Maryland, and Virginia

 The Multistate Filing Project

 DC government website

 Maryland government website This communication is provided by the D.C. Bar Pro Bono Center and the authors as a public service solely for informational purposes, without any representation that it is accurate or complete. It does not constitute legal advice, and should not be construed as such. It does not create an attorney-client relationship between the recipient and any other person, or an offer to create such a relationship. This communication contains information that is current as of the date it is written. However, laws change, and as a result the information may no longer be timely. Consult an attorney if you have questions regarding the contents of this

communication.