Nonprofit organizations have been around for a long time. A nonprofit organization is an organization that uses its profits for a charitable purpose rather than benefiting investors, shareholders, or owners. Registered charities enjoy tax-exempt status and may be religious organizations, educational institutions, etc. But there are specific rules when it comes to nonprofit registration and management.
Registering your non-profit for fundraising
There are regulations governing donations and business registrations. If your nonprofit organization, or NPO, requests donations from residents in particular states, then you may need to learn about nonprofit fundraising registration.
NPOs have previously had some leeway when it comes to these rules, but state governments and the IRS have cracked down in recent years. Odds are your NPO will be affected by these regulations; all states except Arizona, Delaware, Idaho, Indiana, Iowa, Montana, Nebraska, South Dakota, Texas, Vermont, and Wyoming enforce these regulations.
Some important exemptions exist, but all states except the 11 above require NPOs to register with a state agency before soliciting donations from state residents.
Solicitations include fundraising activities that include any kind of donation requests, such as advertisements, commercials, emails, mail, phone, or internet correspondence. Even if your NPO doesn’t receive donations, soliciting donations is enough to require registration.
States requiring registration
The majority of states require registration before you engage in charitable solicitation, including:
- North Carolina
- New Hampshire
- New Jersey
- South Carolina
- District of Columbia
- North Dakota
Registering your nonprofit
All but the biggest nonprofits tended to ignore state registration regulations until recently. Some experts estimated that over 90% of nonprofits failed to meet required legal registrations. Usually, nothing happened because states didn’t have the means or desire to enforce these regulations. However, things have changed. The IRS recently revamped Form 990, which now requires NPOs to provide information about their registration status.
Thus, NPOs must pay attention to registration requirements. Otherwise, they can’t complete their annual reporting. It’s much easier for the IRS to scrutinize NPOs now, and you’d risk unwanted attention, scrutiny, and possible problems with donors.
Failure to register
The IRS isn’t your only issue – failure to register (where you’re required to do so) is a breach of state law. States can impose fines and penalties on nonprofits that fail to register, and these fines may be substantial. Pennsylvania imposes a $1000 fine for failure to register. In some states, including California, Pennsylvania, and Virginia, you may be listed publicly on a delinquent list which could harm your NPO’s reputation. Tennessee and Maryland charge up to $5,000 for each violation.
Some states take it even more seriously – Ohio and Florida assign felony charges for certain failure to comply with registration requirements.
The state you operate in may also order your nonprofit to cease operations in the state until you complete registration and pay outstanding penalties.
Registering your nonprofit
Registration is simple and usually involves filing an application with the appropriate state agency and paying a registration fee. You’ll be asked for some financial information for most applications, often consisting of your most recent IRS Form 990. Registration is usually a two-part process, an initial registration and an annual renewal/financial reporting requirement.
There’s no universal registration application for each state, though. Your NPO must register with each state individually, following each state’s guidelines. The requirements for registration may differ dramatically; the more states you fundraise in, the more registrations you’ll need to submit. Even the name for registration varies; in some states, it’s a license, solicitation certificate, or permit, and it may be called a registration statement.
Registration can be a hassle, but several NPO types are exempt from some states’ regulations; most states exempt some charitable organizations such as hospitals, religious and educational institutions, and very small NPOs from the registration requirement. A few states also ignore NPOs that receive contributions from below a specified number of state residents.
For example, Massachusetts ignores contributions from ten or fewer people per year. You won’t need to register if you have donations below this number. If your NPO is exempt, your registration burden will be reduced or possibly eliminated. Unfortunately, it can be hard to determine if NPO is exempt or not.
The list varies from state to state, and an NPO may be exempt in one state but not in another. You must approach it on a state-by-state basis; If your organization receives less than $25,000 per year in donations, you may be exempt from registration in New York, but you’ll still be required to register in California. This means you’ll need to look at the laws in each state to check for exemptions. In addition, exemptions aren’t always automatic. In 12 states, you’ll need to confirm your exemption with the state charity office or secretary of state.
Registering your NPO yourself
Registering your nonprofit can be expensive; most larger nonprofits can afford to hire attorneys, law firms, or another registration specialist to handle their registrations. However, you can register your nonprofit alone; you just need to understand the registration rules and application process in all states where you’ll need to register.
Charitable solicitation registration doesn’t equal qualification to trade.
Remember that registering to solicit and filing for a business license isn’t the same. With few exceptions, you aren’t required to file for a business license if you’re only fundraising via email, mail, online, or phone.
A nonprofit organization, or NPO, is an organization that focuses on a social or charitable cause. Rather than generating profits for shareholders or owners, profits are funneled towards a predefined cause. To avoid abuse, NPOs are governed by strict regulations, particularly regarding fundraising registration. You should always strive to fundraise ethically if you’re part of a nonprofit organization, and part of that is achieving proper registration.
Unfortunately, there is no universal way to register your NPO’s fundraising rights in one go, and you’ll need to file an exemption in 37 states and DC, plus filing an exemption in Missouri (assuming you’re running a registered charity that isn’t related to veterans, law enforcement, etc.).
Failure to maintain correct registration can result in fines of $5000 or more and, in some states, may even amount to a felony. If you’re unsure of whether you’ve registered your NPO correctly, you should get legal advice as soon as you can.