Nonprofit and religious organizations who engage in charitable fundraising must follow all relevant state rules and guidelines. These rules can vary depending on the type of fundraising involved and who is performing the fundraising.
Registration Requirements for Charitable Fundraising
Charities, their employees, and their volunteers are not required to register as fundraising professionals with the Attorney General’s Registry of Charitable Trusts. However, the charities must register within 30 days of first receiving any property.
However, if the charity hires a third-party for-profit professional for fundraising, registration requirements apply. Specifically, commercial fundraisers and fundraising counsel must register with the Attorney General. Likewise, charities that are seeking donations in California only may contract with registered professional fundraisers. They must pay a registration fee and renew their registrations annually.
Charities can also partner with commercial coventurers, which are parties engaged in trade or commerce who represent that the purchase of something they sell will benefit a charitable organization. Commercial co-venturers also must register with the Attorney General unless they are exempt under California law.
Regulatory Requirements When Working with Fundraising Professionals
Charities must have a written contract with any fundraising professional with whom they work. In addition, they must have a separate contract for each fundraising or solicitation campaign. Each contract should specify the fees to be paid, each party’s obligations, the charitable purpose of the campaign, the effective and end dates of service, and cancellation rights.
At least ten days before starting a solicitation campaign, fundraising professionals must file a notice of intent to solicit with the Registry. However, in the case of emergency hardship or disasters, the fundraising professionals must file the notice of intent to solicit no later than when the campaign begins.
Commercial fundraisers also must file an annual financial report with the Registry, which is an itemized accounting of all the funds collected for the previous year. In addition, these fundraisers must keep records for inspection for at least ten years, including the dates and amounts of each contribution, the name and address of all donors of non-cash contributions, names and addresses of solicitation personnel, and records of their revenue and expenses concerning all solicitation campaigns.
Charity Obligations and Responsibilities When Fundraising
Whether a charity performs its fundraising activities or hires professionals, it must maintain control over all fundraising efforts. For example, the charity must review all fundraising materials, approve all written contracts, and accurately report contributions and expenses.
Any type of charitable solicitation requires the disclosure of all relevant material facts. They also may not use unfair or deceptive practices that might cause confusion or misunderstandings. For example, charities may not misrepresent how they will use donations, and once they receive donations for a specific purpose, they must use the donations only for that purpose.
Face-to-face solicitations also require specific disclosures. For instance, the person soliciting the funds for the charity must give the prospective donor printed material with the name and address of the charity, its tax-exempt status, and whether donations are tax-deductible. Additional disclosure requirements apply if the solicitation is on behalf of law enforcement, safety personnel, or veterans. In other types of solicitations, solicitors must mail the printed materials to individuals who make donations.
Charities must file annual reports on their financial solicitations when they meet certain fundraising thresholds. More specifically, charities that raise more than 50% of their annual income and more than $1 million in charitable contributions from donors in California must file these reports.
Local jurisdictions such as cities or counties may have additional requirements for charitable organizations. For instance, they may require charities to apply for permits or licenses to hold specific fundraisers. They also may have independent financial reporting or registration requirements.
Bingo and Raffles
Bingo and raffles are private lotteries that are illegal gambling under state law. However, tax-exempt organizations generally can use these types of activities as fundraisers if they meet certain conditions. For instance, these fundraisers must devote a certain amount of their profits to charitable purposes. There also may be restrictions on where these activities are held or who can participate. In addition, organizations may need to get licenses from local jurisdictions to operate these activities.
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Church Law Center gears its practice to legal matters that affect nonprofit organizations, churches, and other religious organizations. This focus allows us to concentrate our efforts on keeping abreast of the ever-changing laws and policies as they develop over time. We are here to represent your interests throughout every stage of your legal matter. Call us today at (949) 245-3177 and see what we can do for you.