Although it might be easily pushed to the bottom of the to-do list below more exciting tasks like fundraising, engaging donors, and executing your programs, nonprofit compliance is critically important. It pays to be compliance-literate so that your team can keep your mission running smoothly (and so that you know what kinds of compliance support services to look for).
Solicitation registration is the perfect place to start your research since it’s an essential requirement to legally fundraise in most U.S. states.
If you’re new to nonprofit compliance or just looking to learn more about this important process, we’ve got you covered. This quick guide will cover:
- The essentials of charitable solicitation registration
- How the solicitation registration process works
- Ensuring your nonprofit’s ongoing compliance
The Essentials of Charitable Solicitation Registration
Let’s review a few common questions about the solicitation registration process:
What is charitable solicitation registration?
Charitable solicitation registration is the process by which a legally recognized nonprofit registers with a state government to solicit donations in that state. This process is also sometimes referred to as fundraising registration.
Solicitation registration isn’t typically a difficult process in and of itself. It only requires that you submit the right paperwork to the appropriate state charities office and then renew your registration as needed over time.
However, it is a very important process, and your registrations must be regularly renewed according to each state’s particular requirements. Getting and staying registered in multiple states can quickly become logistically complex as you juggle deadlines and differing state requirements. We’ll cover a few tips for simplifying the process at the end of this article.
What’s the purpose of solicitation registration?
So why do nonprofits need to register to solicit donations in the first place? Simply put, states need to protect donors and assure them that their gifts are going towards reputable nonprofits.
The registration process allows states to double-check that your nonprofit is federally recognized as a 501(c)(3) and meets the other criteria that they deem essential for compliant fundraising. By renewing your registrations over time, you’ll confirm that your nonprofit is still in good standing at both the federal and state levels.
What are the consequences of not registering?
The penalties for failing to register your nonprofit before soliciting donations in a state can vary between jurisdictions, and they can sometimes be severe. Consequences can include:
- Fines and late fees
- Civil and criminal action against nonprofit officers
- Denial of the right to solicit funds in that state
- Eventual revocation of your tax-exempt status
But even aside from these direct penalties from state governments, the negative publicity from a lapse in compliance can also result in lost donations and grants as donors and other stakeholders lose faith in an organization’s ability to operate responsibly. Importantly, these consequences can come into play even if you unintentionally neglect to register.
Thankfully, the easiest way to avoid these penalties is straightforward—understand your solicitation registration requirements and keep your nonprofit’s registrations renewed over time.
How the Solicitation Registration Process Works
There are several steps to charitable solicitation registration, and they should be thought of as an ongoing process:
1. Understand your registration requirements
Start by determining exactly what’s required of your nonprofit. Use this checklist to cover the essentials:
- Which states do you need to register in?
Currently, 41 states and the District of Columbia require registration. Those that don’t include Delaware, Idaho, Indiana, Iowa, Montana, Nebraska, South Dakota, Vermont, and Wyoming—however, these states may have varying exemptions depending on the type of organization, so take the time to double-check. Labyrinth’s directory of state-by-state registration requirements rounds up all the most important information.
Which state office should you send your registration form to?
Solicitation registration is typically managed by either the State Attorney General or Secretary of State.
What are each state’s specific documentation requirements?
The specific materials you’ll need to provide to initially register can vary greatly between states—we’ll cover the most common documents needed below.
Do any of the relevant states require disclosure statements?
Some states require organizations to publish disclosure statements that publicly alert donors that they’ve been registered with that state. If you’re required to publish disclosures, research their requirements, as some are quite specific.
What are each state’s application fees?
Initial filing fees vary by state, so plan ahead and understand the cost that registrations and ongoing renewals will incur for your organization.
A running theme through these requirements (and all areas of nonprofit filing and compliance) is that they can vary greatly between states. They’re also constantly changing, so doing your upfront research and staying on top of updated policies over time will be important.
2. Gather your necessary registration documentation
Again, the exact requirements for each state’s registration process vary, but these are the most common materials that you’ll need to reference or provide:
- Your latest IRS Form 990
- Your nonprofit’s bylaws
- Your nonprofit’s articles of incorporation
- An IRS Letter of Determination
- Lists of your officers, directors, and trustees
- Audited or reviewed financial statements
- Any contracts with fundraising counselors, solicitors, and consultants you’re working with
- Any commercial co-venture contracts for any partnerships with for-profit businesses
Some jurisdictions might also require that you complete other state-specific forms. Again, thoroughly researching your requirements or working with a nonprofit compliance service will be key to ensuring nothing falls through the cracks. Rejected applications can significantly draw out the process of getting registered to fundraise, so it pays to be prepared from the start.
3. Send your applications and wait for approval
Compile and send your registration applications to the relevant state offices, and then wait for approval before you begin soliciting donations from residents of those states.
4. Create an organized renewals process
As you wait for approval, get a head start on renewals by creating an organized process for tracking and managing them—more on this tip next.
Ensuring Your Nonprofit’s Ongoing Compliance
Compliance is an ongoing task and shouldn’t be treated as a one-and-done activity. After all, the consequences of compliance lapses can seriously slow down or derail your nonprofit’s work. As you register to fundraise, you’ll need to develop an organized process for staying on top of your requirements and deadlines and managing renewals. Consider these tips:
- Create a dedicated spreadsheet or dashboard in your management software for recording relevant information relating to registration dates, fees, renewals deadlines, etc. with digital copies of your applications attached when possible.
- Create some standard data hygiene protocols and steps to ensure all incoming data is recorded in the same organized way.
- Store and retain paper copies of your applications and approvals from state offices in a physical filing system.
- Designate an individual to oversee the registration and renewals processes—ideally a staff member who is unlikely to leave the organization anytime soon. However, you should still ensure that knowledge of the process and documentation aren’t completely siloed in this individual in case another staff member will need to step in to help or take over the process.
This process can work well for smaller nonprofits only registered in a handful of states. However, as organizations grow so do their compliance requirements and the time and energy needed to fulfill them. This is why many nonprofits choose to work with third-party compliance services to reduce the logistical burden on their own teams, whose time is likely much better spent on fundraising and programming.
Nonprofit compliance services can handle the entire registration and renewals process on your behalf. This eliminates the risks that come with juggling multi-state registrations and differing deadlines. Comprehensive services can also provide registered agents, fundraiser registration for solicitors and consultants, corporate registrations to do business in states, and registrations for commercial co-venture agreements.
These services, backed up by your own team’s understanding of the solicitation registration process, will ensure that your nonprofit can keep running smoothly for years to come.
About the Author: Sharon Cody, J.D., Nonprofit Market Manager at Labyrinth
Sharon Cody, J.D. is the Nonprofit Market Manager at Labyrinth, Inc., the leading provider of state charity registration services. Sharon is passionate about educating nonprofits and fundraisers on the role of state charitable compliance as both a best practice and an industry differentiator. She received her bachelor's degree from Rutgers University and her Juris Doctor from Penn State Dickinson School of Law. Sharon’s more than 30 years of experience as an attorney, charitable fundraiser, foundation executive, donor, and nonprofit board member give her unique insight on the use of fundraising compliance as a strategic tool to build trust, enhance reputation, and increase revenue.