Who needs to complete state charity registrations?
Most 501c3 nonprofit organizations need to register in all of the states where they ask for donations. Higher education, religious organizations, hospitals, foundations, member organizations, etc., may be exempt from the law in some states, but may still need to file financial and other documents in select states. When requirements and exemptions change, we keep you up to date.
Why is registration important?
Simply stated, it’s the law.
Just as a nonprofit is required to file IRS Form 990 to maintain its tax-exempt status, charities are required to maintain nonprofit registration in over 40 states. In most cases, registration is required prior to commencing fundraising in a specific state. There are exemptions for certain types of nonprofit organizations in some states, which reduces the number of mandated registrations.
The IRS has now inserted itself into what used to be a state issue by changing the IRS Form 990. Charities are now required to answer questions about their fundraising activities AND state registrations.
Specifically, IRS Form 990 Part VI, Line 17 now asks the question: “List the states with which a copy of this Form 990 is required to be filed.”The instructions are clear in that the appropriate states must be listed even if the charity has not registered. This filing is just one part of the state-specific charitable registration process. It is important to note that it does not ask where you have filed, rather where you are required to file. Schedule G also asks for information about where you are registered.
Ask yourself this: What is the view of your Board of Directors about compliance “only when someone is watching?”
Donors expect charitable organizations to be diligent about compliance. Ignoring the state laws puts your organization at risk. For the board and staff members, compliance is a best practice of financial stewardship. The cost is typically a small fraction of the funds raised. Compliance just makes sense, especially when faced with the potential consequences of not filing state registrations and renewals.
What do we need to do with our IRS Form 990?
In order to be accurate in completing your 990 Form, you must list the states with which a copy of the 990 is required to be filed. (Part VI, Line 17)
What is the definition of fundraising as it relates to nonprofit registration?
Any charitable solicitation, either directly by the nonprofit, by volunteers, by professional fundraisers or others on your behalf, triggers the charitable registration requirement. Common examples include: direct mail, telephoning, purchasing advertising within the state, national media advertising, holding or publicizing fundraising events, door-to-door solicitations, placing donation boxes, etc.
Applying for grants is frequently considered fundraising, as is raising funds online (e.g. websites, emails, etc.). Social media is a very common tool for fundraising, as is a “donate now” button on your website. Both are considered fundraising in some states.
We have already begun active fundraising in states requiring nonprofit registration, but are not registered. Now what?
In most states, if you take swift action once you are aware of the requirements, there is not a penalty for late registration. The key is swift action. There are a few states that may levy a fine / late fee to be submitted with your first registration.
What will it cost for our nonprofit to comply with charitable registration requirements?
Each state registration fee varies, from free to those with sliding scales based on amount of funds raised. Retaining the services of a professional, such as Capstone Charity Resources, LLC, to track due dates, gather the required information unique to each state, coordinate the numerous required signatures and file the annual reports, will result in an additional fee based on the number of states where registration is required. Through a free assessment, Capstone Charity Resources can estimate the cost of initial registrations and annual renewals.
What happens if we don’t submit the charitable registration filing?
That depends. Each state enforces registration and determines the impact of not registering. Most include the option for:
- Penalties against the non-registering charity. Daily fines up to maximums of $50,000 may be assessed.
- Penalties against responsible people. Due to incorrect information being supplied on the IRS Form 990, the IRS can require a correction within a given timeframe. Daily fines up to a maximum penalty of $5,000 may be charged to the person responsible for complying with the IRS request in a timely manner.
- Loss of tax exemption status in extreme cases and in cases where incorrect returns are repeatedly filed.
Are penalties ever imposed?
Yes. The failure to submit the charitable registration filing has resulted in fines and scrutiny of worthy nonprofit organizations. For example, a large gift to an organization was contested, a professional fundraiser was investigated and, as a result, those nonprofits are now under the microscope. In addition, a large grant was received by an organization, and noncompliance drew attention from the state. Remember, with tight budgets, states have become much more interested in collecting the charitable solicitation registration fees.
Can I register our charity myself?
If your organization has the time and expertise, Capstone offers two self-service options to allow you to register your charity in the required states. Learn more about Self-Service and Self-Service Plus+ to see if one is right for you. Even with easy-to-use tools and expert support, registering your charity, managing the deadlines and paperwork and keeping up with renewals can be a time-consuming process. There may also be changes in reporting requirements that affect your organization. If your staff’s time would be better spent on fundraising and mission, our affordable Full Service Charity Registration options provide guaranteed coverage to ensure your compliance with the law.
At Capstone Charity Resources, our only services are nonprofit registrations. Capstone has built the necessary technology and processes to provide an expert, seamless and turnkey service for every one of our nonprofit clients. We are expert at it. It’s what we do.
How do I know if nonprofit registration even applies to our organization?
Most 501(c)(3) public charities are required to register in those states where solicitations are being made. It is import to remember that it is the “ask,” NOT the receipt of a donation that precipitates the requirement for charitable registration. An assessment of each state law determining charitable registration requirements is required even if you qualify for exemptions in any state in which you are raising funds.
Are exemptions available for certain types of nonprofit organizations?
Most states provide exemptions for nonprofit organizations in select categories. Higher education, religious organizations, hospitals, foundations, member organizations, etc., may be exempt from the law in some states, but may still need to file financial and other documents in select states. Several states offer an exemption, but nonprofits are required to file an initial exemption, and in some cases, annual exemption filings. When requirements and exemptions change, we keep you up to date.
Where do I find the regulations governing charitable solicitation registration?
State legislative code determines the specifics; regulations are unique to each state. Additionally, supporting documentation typically originates from the Secretary of State or Office of the Attorney General for each state. In some cases, other agencies govern the charitable registration process. State-level regulation changes frequently.
Due to the complexities of state-by-state registrations and renewals, many organizations engage with an expert resource to process and submit nonprofit registration filings. Capstone Charity Resources provides one-stop services for all your charitable solicitation registration filings.
Beyond the IRS Form 990, is any additional information required for charitable solicitation registrations and renewals?
Yes. The initial Nonprofit Registration is the most comprehensive and can include information such as Articles of Incorporation, bylaws, IRS application for nonprofit status and letter of determination, certificates of good standing, board of directors list with specific information about each member, and the most recently completed 990 Form, and other items as determined by each state. Annual renewals can require less information, or in some cases, additional new information with updates to items that have changed since the initial charitable registration was filed. Each state determines those requirements and may change the form or information required for registration at any point.
When do we need to file our charitable solicitation registrations and how often do we renew them?
Your initial charitable registration should be filed as soon after you become aware of the need to register. Your registration due date will vary by state. In some cases, it may be the same due date for all organizations in a given state, or it may be based on your fiscal year end. In many states, if your IRS Form 990 is not completed in time, extensions are granted. Capstone Charity Resources tracks deadlines and extensions for you.
Most states require an annual filing of renewal registration information. However, there are states with multiple filings within the same year, and some only require filings every other year. This is where Capstone Charity Resources comes in. We know the registration processes and laws and can help you be in compliance wherever you solicit donations.