Be Aware of Nonprofit State Regulations

Be Aware of Nonprofit State Regulations

Registration of a nonprofit doesn't end within the state in which the nonprofit resides. States' regulations over the nonprofit sector is becoming increasingly stringent and reporting requirements bind nonprofits to administrative activity and bureaucracy that may be unexpected. There are, however, tools and information to help with this process, which we've provided below.  

States pass and consider new legislation frequently, so it is up to nonprofit organization owners and management to ensure that they comply with current laws and keep up with new laws in any states where your organization does business. Some entities are exempt such as churches and educational institutions.

Compliance costs can blow a new nonprofit's starting budget. State regulations have not been widely enforced in the past, but some states have, and others currently propose, task forces to oversee and command nonprofits to comply, and penalize when they don't. California monitors nonprofits through three different state agencies.  

If a state finds a nonprofit organization non-compliant,  the org risks not only loss of charitable status, but likely hefty fines, and even possible jail-time. In Connecticut, non-compliance of nonprofit regulations is a criminal offense.

Management of nonprofit organizations must learn, not only the state regulations that your nonprofit organization resides in, but ANY state where your nonprofit does fundraising of any type. For instance, If you have a website with a donation button, there's a good chance you could receive donations from any state. You must check each state to see if you need to register or report your revenue coming to your organization from that state. 

For example: If you send a fundraising email to residents in a state like California, the non-profit is required to register with California no matter where they are incorporated or headquartered, with details IN ADVANCE for EVERY fundraising campaign. 

Even crowdfunding activities (GoFundMe, Kickstarter, Indiegogo, and the custom t-shirt design websites made for charity) are subject to cross-state registration. 

Most states regulate the nonprofit sector, but there are some that do not. Only three states lack any regulation at all and seven others require little effort. (Source: Affinity Fundraising Registration, Colorado)

State Registration of nonprofits

Some good news is that more and more states are moving the registration process online. Even better news is that nonprofit support associations are working on a project that will help to alleviate the mounds of bureaucracy that state agencies subject to fundraising activities. The "Multistate Registration and Filing Portal" (MRFP) collaborates with the National Association of State Charities Officials (NASCO), and National Association of Attorneys General (NAAG) to enable charities to file with all states from this one website portal. It hasn't launched yet, but look for this in the future. 

Below are a few good resources to help you comply with state requirements: 

National Council on Nonprofits is a great source of information: https://www.councilofnonprofits.org/tools-resources/charitable-solicitation-registration

LexMundi ProBono offers an extensive database of all state regulations, simply plug in the state: http://www.lexmundiprobono.org/lexmundiprobono/Legal_Resource_Center.asp

National Association of State Charity Officials provides each state's governing body over nonprofit organizations: http://www.nasconet.org/

Multistate Registration and Filing Portal: http://mrfpinc.org/index.html

If you have any questions, please feel free to contact us!

 

 

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