Registration: A common sense approach

Should nonprofit organizations register as fundraisers in every state just because they have a donation button on their website?  Should nonprofits go to the time and expense of registering in all 50 states?  Clearly, the answer is no.  Nine states require no registration.  The remaining states are subject to interpretation and your intention.  Unfortunately, a small group of vendors and other professionals in the nonprofit sector purport this notion.

We often hear this question about state registration, so we offer the following information.   According to our research, organizations that “actively solicit” donations in a state are required to be registered in the state.  The key words here are “actively solicit”.  

Publishing a website with the ability to accept online donations is not active solicitation.  Neither is having a published phone number.  After all, what is the difference between having a phone number and a web site?  They both allow donors to donate to the organization.  One is through a web site and the other is by phoning in the donation.

Let’s go over some examples:

Mary’s uncle has passed away in Texas.  Mary lives in Virginia and would like to donate $30 to a Texas SPCA in memory of her uncle.  Mary calls the SPCA and donates the money to the SPCA over the phone?  Should the SPCA decline the donation because Mary lives in Virginia and the SPCA is not registered in Virginia?

Not according to the Virginia Department of Agriculture and Consumer Services which oversees the Charitable Solicitations in the State of Virginia.

• http://www.vdacs.virginia.gov/forms-pdf/cp/oca/charitable/ocalaw.pdf

According to the Division of Consumer Protection, the Texas SPCA should accept the donation from the Virginia resident and is not required to register in Virginia.  Why?  The Texas SPCA did not actively solicit the donation from the Virginia resident.

When should the Texas SPCA register in Virginia?  Prior to the organization’s initiation of an active campaign of soliciting donations in Virginia.  Had the SPCA sent a letter asking Mary for a donation in memory of her uncle, then it is required to register.  Otherwise, a passive donation by a Virginia resident to a Texas charity does not automatically trigger a registration requirement.

Taking this one step further, requiring organizations with online donations to register in every state is like asking any organization that has a web site to also register with the European Union.  If EU citizens have access your website, then perhaps the organization should be registered in the EU too. 

This example demonstrates the absurdity of this registration requirement, as it is being circulated among nonprofits without proper education or justification.

Rules and regulations for registering charities with states are administered by the National Association of State Charity Officials (http://www.NASCOnet.org).

Most states follow the NASCO’s Charleston Principles for registration guidelines.  Details may be found on the National Association of State Charity Officials (http://www.NASCOnet.org).

• http://www.nasconet.org/Charleston%20Principles%2C%20Final.pdf

The following are excerpts from the Charleston Principles:
"An entity that is not domiciled within a state must register in accordance with the law of that state if:

a. Its non-Internet activities alone would be sufficient to require registration;

b.

(1) The entity solicits contributions through an interactive Web site; and

(2) Either the entity:

i. Specifically targets persons physically located in the state for solicitation, or

ii. Receives contributions from the state on a repeated and ongoing basis or a substantial basis through its Website.; or

c. (1) The entity solicits contributions through a site that is not interactive, but either specifically invites further offline activity to complete a contribution, or establishes other contacts with that state, such as sending e-mail messages or other communications that promote the Web site; and

(2) The entity satisfies Principle III(B)(1)(b)(2).

In the following case, I spoke with the Virginia Department of Agriculture and Consumer Services and discussed Click & Pledge and its clients.  I used Kansas Public Radio as an example:

• http://clickandpledge.com/trio/who_uses_trio/kansaspublicradio.asp

Should the Public Radio Station be registered in the State of Virginia since their donation page lists Virginia in the pull down menu?

The answer was a definite NO.  Having the State listed in the form is not indicative of solicitation.  Here is an example:  Why should someone travelling through Kansas that enjoys the music by KPR, not be able to donate money during or after driving through the state?

One last example involves a requirement mandated by the Federal Election Commission that any donor to a federal political campaign must be an American Citizen.  Based on this requirement, a few of our clients, despite our counsel, asked that all foreign countries be removed from their donor forms.  The result is that many U.S. citizens on military bases around the world and living abroad are unable to donate.  These patrons should have been enabled to donate easily online.  Unfortunately, we are forced to refer them to the campaign for advice.

At Click & Pledge we have always advised our clients to research these matters and don’t accept the “common wisdom” as the answer.  The issue is simple and the answer is logical.  An organization should simply know when it is soliciting and when it is not.

Our product has the capability to limit the states and countries that an organization can accept donations from.  Should organizations start using it?  Perhaps not, given the Charleston Principle.  We just ask that you are aware of the features that are available and use them wisely.

For a review of how restricting countries or states may be accomplished please visit the online manual at:

• Online Manual:  Restricting Countries & States

We like to hear your comments on this issue.

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