Charitable registration is a process that’s required for those nonprofits that solicit charitable donations from the public. From a legal perspective, “solicit” can be defined as “requesting a donation.”
The registration is completed on the state level, as the nonprofit registers with its appropriate government office. Usually, this means registering with the state’s attorney general or the Secretary of State. You should check with your state government to be sure where to register.
A majority of nonprofits that fundraise are required to register, but a few types may be exempt, including some religious organizations, education groups, and nonprofit hospitals.
“Soliciting” does not mean that you have a detailed campaign and professional fundraisers calling thousands of people each day to ask for money. In fact, solicitation could be as low-key as having a “donate” button on your website, but if you do have professional fundraisers working as your solicitors, you need to ensure that they have licensure in the state, too.
It’s likely that your state requires registration, because most states do. However, there are also several states that do not require charitable registration: Delaware, Montana, Idaho, Wyoming, South Dakota, Nebraska, Arizona, Iowa, Indiana, and Vermont.
However, even states which don’t require charitable registration may have other rules about soliciting and receiving donations. That’s why you should check with your state government to learn what regulations exist.
In addition to the charitable registration, about half of all states require you to supply a disclosure statement to donors. This statement provides information about your nonprofit, including your finances, your mission, your leadership, and more. This in turn helps your potential donors make an informed decision.
In total, 23 states require both a charitable solicitation registration and a disclosure statement:
There are also 17 states that only require a charitable registration:
Finally, the states of Iowa and Delaware only require a disclosure statement, and in eight states, you aren’t required to provide a disclosure statement or a charitable registration: Arizona, Idaho, Indiana, Montana, Nebraska, South Dakota, Vermont, and Wyoming.
Registration requirements vary from one state to another, but the basic components are the same. Usually your state provides an application to complete — you fill out this form and send it to the appropriate government office along with a few other documents, including a copy of your 501(c)(3) designation letter (if applicable), and a detailed description of your nonprofit.
You must complete this registration before you start soliciting funds, so if you have a “donate” button planned for your website, you should complete the registration before it goes live.
In addition, there is a renewal process for charitable solicitation registrations. In most states, renewals are due on an annual basis. While the process does vary somewhat from state to state, in general you’ll need to file your most recent financial reports, which usually includes your IRS Form 990. In some states, you’ll also need to file your initial organizational documents and nonprofit bylaws every year, but in others you’ll only need to submit these forms with your initial registration.
Understandably, charitable registration matters because it’s legally required. But on a deeper level, the registration is important because it keeps nonprofits accountable for their use of the donations they receive.
Being a registered nonprofit instill your donors with confidence — the registration acts like the state’s stamp of approval, guaranteeing that you use your donations responsibly. Individuals donate because they want to further a cause, so they want to be sure their funds actually go to that cause, and like we mentioned earlier, the registration and accompanying disclosure help your donors make an informed decision. In addition, failing to register or renew your registration could incur severe penalties. This could include fines and fees, poor PR, or even the loss of your tax-exempt status.
One final point we’d like to note is that online fundraising can pose some distinct compliance challenges. The internet makes it easy for nonprofits to bring in donations from all over the place, but in theory you might want to think twice before adding a donation option to your website, because the mere act of soliciting is what requires registration.
That means that to remain compliant, you might actually need to meet the registration requirements of all 50 states before partaking in any online solicitation.
Charitable registration is a mandatory step for nonprofits in most states, and overlooking it can be costly. Fortunately, it’s a relatively simple process, and completing it can actually increase your odds of raising funds, so it’s well worth the hassle.
The overarching point we’d like to make is that each state has its own requirements regarding charitable solicitation registrations and disclosure statements, so you should make absolutely sure you’re submitting the right materials for your state.
In addition, keep in mind that if your nonprofit operates in more than one state, you’ll need to follow the rules and regulations for each state you operate in.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
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