The State of California Department of Justice (DOJ) issued proposed regulations to implement the new charitable crowdfunding law, Assembly Bill No. 488, on May 27, 2022. This bill places charitable fundraising platforms and platform charities under the supervision of the Attorney General, effective January 1, 2023.
Registration of Commercial Charitable Crowdfunding or Fundraising Platforms
Using third-party crowdfunding platforms, particularly on social media, to host charitable campaigns has risen steadily in popularity in recent years. These platforms typically charge a fee equal to the percentage of donations raised in exchange for managing the collection of those donations and tracking progress toward the charitable crowdfunding goals.
The California DOJ’s new regulations define a commercial charitable fundraising platform as “any person, corporation, unincorporated association or other legal entity that uses the internet to provide an internet website, service, or other platform to persons in this state, and performs, permits or otherwise enables acts of solicitation to occur.” Section 315 requires all charitable fundraising platforms to register with the Attorney General before soliciting, permitting, or otherwise enabling acts of solicitation. These platforms must pay a $625 registration fee and submit Form PL-1: Initial Registration for Charitable Fundraising Platforms.
Furthermore, charitable fundraising platforms must renew their registrations annually before January 15th of each year if they intend to perform, permit, or otherwise enable any acts of solicitation, or will receive, hold, control, or send donations or grants of recommended donations based on acts of solicitation from the current or prior years, including partnerships with other platform charities. Charitable fundraising platforms must pay a $625 renewal registration fee and submit Form PL-2: Registration Renewal for Charitable Fundraising Platforms.
Platform Charities
The new regulations require that platform charities register with the Attorney General as trustees and file annual reports. Suppose these entities enter into partnerships with charitable fundraising platforms to facilitate acts of solicitation on those charitable fundraising platforms. In that case, they must file a form giving notice to the Attorney General within ten days of entering the partnership unless they have previously provided notice.
Annual Reporting Requirements
Charitable fundraising platforms and platform charities must file annual reports with the Attorney General on or before July 15th of each year for the fundraising activities for the prior year. Even if a charitable fundraising platform does not renew registration for the current year, it must file the annual report on Form PL-4: Annual Report for Charitable Fundraising Platforms or Platform Charities. In some cases, a partnering platform or charitable fundraising platform may file the charitable fundraising platform’s PL-4 on its behalf.
Good Standing of Charitable Organizations
The Attorney General maintains a May Not Operate or Solicit for Charitable Purposes List that contains the names of all charitable organizations that are not in good standing. Accordingly, charitable crowdfunding platforms and platform charities may not solicit, permit, or otherwise enable solicitations or receive, hold, control, or send funds from donations for a recipient charitable organization or other charitable organization on the most recent List. However, a charitable fundraising platform or platform charity has a five-business-day grace period to comply with this requirement concerning a charitable organization that is on the most recent List but not on the second most recent List.
Other Provisions of Assembly Bill No. 488
Assembly Bill No. 488 contains various other provisions that pertain to charitable fundraising platforms and platform charities, including the following:
- Requirements of any agreement between a recipient charitable organization and a charitable fundraising platform or platform charity to use the recipient charitable organization’s name in a solicitation on or through a charitable fundraising platform;
- Furnishing tax donation receipts to donors after donations are made following acts of solicitation involving commercial charitable fundraising platforms or peer-to-peer fundraising platforms;
- The timeframes that a charitable fundraising platform or platform charity has to send donations or grants of recommended donations stemming from acts of solicitation involving commercial charitable fundraising platforms or peer-to-peer fundraising platforms to recipient charitable organizations;
- The information that a charitable fundraising platform or platform charity must provide when sending donations or grants of recommended donations stemming from acts of solicitation involving commercial charitable fundraising platforms or peer-to-peer fundraising platforms to recipient charitable organizations;
- The written notifications that a charitable fundraising platform or platform charity must provide to donors concerning the sending of their donations or grants of recommended donations stemming from acts of solicitation involving commercial charitable fundraising platforms or peer-to-peer fundraising platforms to recipient charitable organizations;
- The handling of donations by persons who engage in peer-to-peer charitable fundraising;
Call Church Law Center Today for Advice On Charitable Crowdfunding
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