What You Need to Know About Charitable Solicitation and Registration Regina Hopkins D.C. Bar Pro Bono Center January 19, 2017 Charitable Solicitation Registration Overview • 39 states and the District of Columbia have laws that require charitable organizations to register with the government before the organization solicits contributions. • The 11 states that do not regulate are: Arizona, Delaware, Idaho, Indiana, Iowa, Montana, Nebraska, South Dakota, Texas*, Vermont, and Wyoming. • Generally, an organization must register in the jurisdiction in which it is incorporated. • It must also register in each state in which it solicits contributions. * Organizations that solicit for certain law enforcement, public safety, or veterans causes must register. 2 Charitable Solicitation Registration D.C.-Based Organizations • Organizations located in D.C. that solicit contributions in the metro area will have to register in Virginia and Maryland, as well as D.C. • Note: Solicitations appearing in newspapers, on radio or T.V., etc., will trigger the registration requirement in MD and VA because the solicitation is circulating in the entire metro area. • If an organization solicits nationwide, it must register in all 39 states as well as D.C. • Note: There are de minimus dollar level thresholds in each state below which an organization is not required to register, but they are generally based on an organization’s entire revenue, not just contributions raised in a particular state. 3 What is a “Solicitation” in D.C.? • D.C. has a very broad definition of what constitutes a solicitation which includes any verbal or written request for contributions. • The solicitation can take the form of a mailing, a posting or publication, or the circulation/dissemination of any written advertisement. • Includes press releases, television and radio appearances, and telephone calls. • Also includes any communications regarding an event (e.g. fundraiser, benefit, contest, party, exhibition, performance, sporting event, social gathering, etc.) which the public is requested to attend, or to which the public is asked to make a contribution. • Also includes the sale of any advertising space, merchandise, subscription, or other thing where the name of any charity is used as an inducement for making the sale, or when a statement is made 4 that all or part of the proceeds will go to a charity. What is a “Solicitation” in D.C.? • A solicitation also includes: • Raffle tickets or drawings; • Grant requests; • Requests for in-kind contributions; and • Certain loans, such as non-interest loans to a charitable organization. • The charitable registration requirements apply to solicitations of: • Individuals; • Foundations; • Corporations; and • Government. 5 D.C. Registration Process • The Department of Consumer and Regulatory Affairs (“DCRA”) oversees the charitable registration process in D.C. 501(c)(3) Status • In order to register under D.C.’s charitable solicitation act, an organization has to be tax-exempt under Section 501(c)(3) of the Internal Revenue Code, as evidenced by their IRS Determination Letter. • This can be a problem for start-up organizations seeking to raise funds in order to apply for 501(c)(3) status. • In order to deal with this difficulty, an organization can make use of a fiscal sponsor – another 501(c)(3) organization that is willing to take donations on behalf of the start-up organization. • The fiscal sponsor has legal control over the funds, and while they are designated for the start-up’s program, the fiscal sponsor cannot 6 use the funds if it would violate its mission under Section 501(c)(3). D.C. Registration Process Business License • An organization wishing to register in order to solicit charitable contributions must do so as part of the process for obtaining a basic business license. • In order to get a basic business license, a nonprofit must first: 1. Ensure it is registered to do business in D.C. with DCRA; • Organizations which are incorporated in another state, but are doing business in the District, must register as a foreign corporation. • “Doing business” includes having an office, conducting programs, hiring employees, or soliciting contributions within the District. 2. Have a registered agent in D.C. – the person who receives legal notices on behalf of the organization; and 3. Obtain tax exempt status under D.C. law and a D.C. tax ID number by filing Forms FR-164 and FR-500 with the D.C. Office of Tax & Revenue. • Once an organization has taken these steps, it can file its application 7 for a basic business license. D.C. Registration Process Business License (cont.) • To file for a business license, applicants must complete the Basic Business License EZ Form. • Along with the BBL-EZ Form, the organization must submit: • A Clean Hands Self-Certification; • The Tax ID number from the Office of Tax and Revenue; • Certificate of Occupancy for its premise; • A copy of the IRS Determination Letter; • A Certified Resolution authorizing the registration; and • A copy of each contract with a professional fund raiser or professional solicitor (if using). 8 D.C. Registration Process Individual Solicitors • When an organization files a Basic Business License application, it has the option of obtaining Solicitor Information Cards for individuals soliciting on its behalf. • In order to obtain the cards, the organization must submit a list of the individuals who will be soliciting and receiving custody of charitable contributions on its behalf, along with their addresses. • Exemption – Any such solicitor who: • does not receive in hand more than $1,500 in contributions during a calendar year; • is unpaid for his or her services; and • pays no part of their collected contributions to any officer, member, or solicitor, or uses contributors for the benefit of these individuals 9 is exempt from the registration requirements. D.C. Registration Process Filing & Renewal • The filing fee for a Basic Business License with Charitable Solicitation registration is $412.50. • Once registered, the organization must display its certificate of registration in a prominent place. • The registration must be renewed every two years. • Renewal is due 30 days prior to the expiration date of the previous license. 10 D.C. Registration Exemptions 1. Organizations that do not raise more than $1,500 per year. • Fundraisers cannot be paid for their services, and no part of the contributions may be paid to any officer, member, or solicitor. 2. Organizations that solicit donations only from their members or members’ families. • The governing body must approve the solicitation. • An individual is not considered a member simply because the person previously donated to the organization. 3. Organizations that only engage in workplace giving campaigns. • The solicitation must be approved by the employer and carried out under the employer’s supervision, and only at the workplace. 4. Religious organizations that solicit for educational or religious purposes. • The organization must submit to DCRA a certified copy of its IRS determination letter and an affidavit stating that the exemption is still in effect. • A religious organization may not solicit contributions until after its application for exemption has been approved. 11 Maryland Registration Requirements • In Maryland, all organizations are required to register with the Secretary of State before soliciting within Maryland. • Organizations must submit Maryland’s Registration Statement (Form COR-92). Applicants will also need to submit: • a copy of the organization’s articles of incorporation and by-laws; • a copy of the organization’s IRS tax determination letter; • a copy of the latest signed IRS Form 990; • the names and addresses of the board of directors; • a copy of all contracts with professional solicitors or fundraising counsel, other than employees located in the State of Maryland; • a statement describing the organization’s mission; and • a statement detailing how the contributions to be solicited will be used. • If the organization’s contributions are at least $300,000, but less than $750,000 per year, the organization must submit a financial review performed by an independent certified public accountant. • If the organization’s contributions are at least $750,000 per year, the 12 organization must submit an audit performed by an independent CPA. Maryland Registration Requirements Registration Fees • Organizations must pay an initial registration fee and, thereafter, an annual fee. Both of these fees are based on the gross level of charitable contributions the organization received from any source. Annual Level of Charitable Contributions Fee Less than $25,000 $0 $25,000 but ≤ $50,000 $50 $50,001 but ≤ $75,000 $75 $75,001 but ≤ $100,000 $100 $100,001 but ≤ $500,000 $200 13 $500,001 and more $300 Maryland Renewal Requirements • Each year the organization must submit the Annual Update of the Registration Form. • The organization must include with the Annual Update: 1. The most recent Form 990 • Alternatively, Form COF-85 if your organization does not have to file a Form 990, or files a Form 990-N; 2. A list of the current board members; 3. Any new fundraising contracts; and 4. A financial review or audit if the organization’s contributions equal or exceed $300,000 and $750,000, respectively. • The renewal date is technically six months after close of the fiscal year, but an extension to the 15th day of the 11th month will be automatically granted. • The organization must also pay the annual filing fee. 14 Maryland Exemptions The following organizations may claim an exemption from registration: 1. A tax-exempt religious organization, parent of a religious organization, or school affiliated with a religious organization. The organization needs to submit to the State of Maryland: • A copy of the IRS determination letter, • The organization's articles of incorporation and by-laws; and • A document explaining the mission of the organization. 2. An organization that only raises funds from its members. To qualify, the organization must confer some benefit to the members and the members must have the right to vote for and hold office in the organization.