The California legislature recently passed Assembly Bill 488 (AB 488) to regulate crowdfunding and other online charitable fundraising platforms. These platforms have exploded in popularity in recent years, and existing state laws provided no regulation of these fundraising mechanisms. States generally have the authority to regulate all forms of charitable fundraising to protect the public. The new law goes into effect on January 1, 2022.
AB 488 amends the California Supervision of Trustees and Fundraisers for Charitable Purposes Act. This Act generally requires any person or entity who holds or solicits charitable donations to register with the California Attorney General (AG) and file annual specific disclosures and other reports with the AG. However, some religious organizations and educational institutions are exempt from these requirements. The AG then can use this information to investigate charity fraud and mismanagement.
Defining Charitable Fundraising Platforms and Platform Charities
Under AB 488, a charitable fundraising platform is any person or entity that uses the internet to provide a website, service, or other platforms to people in California and performs or allows acts of solicitation to occur. Platform charities are charitable organizations that facilitate acts of solicitation on charitable fundraising platforms.
Due to these broad definitions, the new law covers common crowdfunding platforms like GoFundMe and websites advertising that a percentage of purchase prices for goods or services are donated to specific charities or inviting customers to make donations at check-out. These websites include PayPal, Amazon, and eBay. However, the definitions specifically exempt the platforms that charitable organizations operate to solicit donations only for themselves.
Requirements of Charitable Fundraising Platforms and Platform Charities
The AG now must draft regulations to implement various requirements of AB 488, including:
- Registration and annual reporting to the AG
- Required disclosures to potential donors about:
- Who will receive the donations
- Circumstances under which a charity may not receive the funds
- How long it will take for the donation to be sent to the charity
- Fees or other deductions from the donations
- The tax-deductible nature of the donation
- Written consent of the charity to receive donations from the platform, unless it meets the following conditions:
- The platform contains only specific public information about the charity
- The platform conspicuously discloses before a person can donate that the charity has not consented to its collection of donations or reviewed its content
- The platform promptly removes any recipient charity from its list upon written request from the charity
- The platform does not require that the charity provide consent as a condition accepting any donated funds
- Segregation of charitable funds in accounts separate from other funds belonging to the platforms
- Donations sent to charities must include an accounting of fees
- Solicitations and donations must pertain only to charities in good standing
- Donations must be sent to charities at least quarterly, subject to a minimum amount of donations received, which may not exceed $10; after four quarters, donations must be sent to charities regardless of amounts
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