July 21, 2016

Managing State Registrations for Email Fundraising

It’s a fact: Thirty-nine states as well as the District of Columbia require charities and other nonprofit organizations to register in order to solicit donations within their jurisdictions. These laws pertain to all media: direct mail, email, telemarketing, door-to-door, etc. If you are sending a fundraising email to a person in one of these states without first registering, you are fundraising unlawfully.

Because state legislatures enact statutes that govern charitable solicitation, regulatory requirements vary by state. This means different filing forms and exhibits, different renewal dates, different filing fees and late filing penalties, different rules to extend filing deadlines, and so forth.

In ten states, the legislatures have not enacted a statute. As a result, registration is not required to solicit in these states: Arizona, Delaware, Iowa, Idaho, Indiana, Montana, Nebraska, South Dakota, Texas, and Wyoming.

Twenty states also require a charity’s fundraiser to register. A state may hold a charity liable if its outside fundraisers fail to register.

Public Policy Objective

The purpose of this type of law is to provide reliable financial and other information to the public concerning nonprofit organizations that solicit donations. Basically, the State wants its citizens to be able to discover how much money a soliciting organization actually spends for the purpose for which it solicits donations, hence the requirement to submit audited financial statements, IRS Form 990, and other data.

State regulators have little discretion in administering the statute that govern charitable solicitation. Many states mandate that soliciting organization disclose at the point of solicitation where prospects may obtain the information that states require charities to file in order to obtain a license to solicit.

Email Solicitations

Solicitations via email suggest outbound emails as opposed to a passive “Donate here” icon on a screen that a prospect may happen across while surfing. Outbound solicitations are analogous to direct mail solicitations in that each is targeted at a specific person even though you may not be able to decipher the prospect’s name from his or her email address.

The problem is that, unlike a physical mail address, it is usually impossible to determine from the email address alone the state in which the email addressee resides. Therefore, the soliciting organization may need to register in all states that so require in order to avoid receiving a “cease and desist” letter from a regulator.

A cease and desist letter means that the soliciting organization must refrain from sending more solicitations until it has duly registered in the complaining jurisdiction. Some state statutes impose penalties for soliciting without a license to solicit. Some statutes impose a fine per solicitation, so the total penalty can be expensive.

Unless the organization that sends outbound email solicitations can show that it did not send any to a particular state that requires advance registration, it is prudent to stay in compliance with state laws that govern charitable solicitation. Remember the burden of proof is on the soliciting organization.

Photo credit: Joe the Goat Farmer

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Carolyn Emigh
Carolyn Emigh is Principal of the Nonprofit Service Group. She is a JD and economist emphasizing postal rates, regulation, and charitable fundraising. She performs economic analysis including damage calculations, evaluation of fundraising programs and contracts, market studies, and intellectual property. She assists nonprofit organizations with compliance of accounting rules that govern allocation of joint costs and testifies in court as an expert witness and otherwise supports litigation counsel.
Interest Categories: Fundraising
Tags: Email, Fundraising Management