Is Your Nonprofit Compliant with State Registration & Audit Requirement Rules?
The following is an excerpt from the Fall Nonprofit Standard newsletter. To read the full article, click here.
Every nonprofit knows that they are subject to federal and state regulations for the state(s) in which they operate, but some state requirements are easy to overlook.
Say your organization operates in only one state and you therefore assume you are not required to register or comply with nonprofit regulations in any other state. Is this a safe assumption? Could you be required to register and comply with all the nonprofit regulations in any other states?
As online fundraising has become pervasive, the answer is this is not a safe assumption. Your organization could be subject to other state rules.
First, take note of the Charleston Principles, which were developed by the National Association of State Charity Officials (NASCO). The Charleston Principles address whether online charitable solicitations by a nonprofit constitute an activity that requires a nonprofit to register in a state. Simply put, the Charleston Principles state that so long as you do not specifically target persons located in a state, do not routinely receive contributions from persons in that state and do not otherwise have to register in that state, your nonprofit would not need to register in that state just by conducting a general online solicitation. The Charleston Principles are not mandatory, but were offered as a guide to be adopted or adapted on a state-by-state basis, and indeed many states have made use of them.
Thirteen states, however, didn’t adopt the Charleston Principles. These states consider the “donate” button on a nonprofit organization’s website an act of active solicitation in their state, triggering registration requirements. These states are Alabama, Florida, Georgia, Illinois, Kansas, Louisiana, Maine, New York, North Dakota, Ohio, Oklahoma, Rhode Island and Utah.
Then there is the state of California. The good news is that California did adopt the Charleston Principles. California, however, represents about 10 percent of the population of the United States. Almost all nonprofits with more than a purely local focus likely routinely receive contributions from Californians and are therefore likely required to register in California—and are subject to the state’s nonprofit annual audit requirement.
What can nonprofits do to avoid compliance pitfalls in California and across the country? For the complete beginner’s guide to nonprofit state registration & audit requirement rules, access the full article in the Fall Nonprofit Standard newsletter.
Special thanks to California nonprofit attorney David Wheeler Newman and California-based Charity Compliance Solutions Inc. for their assistance with this article.
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