Complying with solicitation rules

By Dianne Chipps Bailey

Fundraising is a fact of life for virtually every nonprofit organization.

Unless your organization is fully endowed or funded solely by program fees, you and your volunteers are perpetually raising money.

These charitable solicitations are regulated by a myriad of state and federal rules. Is your organization in compliance?

First, be sure you have obtained and annually renewed all necessary solicitation licenses; more than two-thirds of the states now require them.

Particularly if you raise money over the Internet, take care to determine where you must be licensed.

Unless you painstakingly manage your database, it’s often impossible to determine where the owners of e-mail addresses are located and, accordingly, in which states licenses may be required.

Each e-mail address should be associated with the owner’s postal address or, at a minimum, his or her state of residence.

Remember also that certain disclosures are required at the time of solicitation and acknowledgement.

North Carolina, for example, has gone so far as to prescribe the font size for its disclosure statement.

It can be a challenge for even the most gifted graphic designer to artfully incorporate this text into a gala invitation – but you must.

You need not include a statement about the deductibility of contributions; however, if you do, never say that “contributions are fully deductible.”

For various reasons, that statement may not be accurate. The better approach is to say that “contributions are deductible to the extent permitted by law.”

Finally, take care in preparing your tax receipts.

Keep in mind, that you should not estimate the value of in-kind contributions received by your organization. That’s always the donor’s responsibility.

On the other hand, you must inform donors of the fair market value of any goods or services that you provide to them, including the value of items donated to your organization.

Also, never send tax receipts to purchasers of raffle tickets, not even the losers.

The IRS has determined that the chance to win, by itself, has a value exactly equal to the purchase price of the ticket, so no portion of a raffle ticket’s price is tax-deductible.

Although enforcement of the charitable solicitation rules is at times inconsistent, failure to observe them is an easy “gotcha” for regulators. Why leave that door open?

With knowledge of the rules and a little planning, your organization can be confident in its full compliance.

Dianne Chipps Bailey is a corporate attorney with Robinson, Bradshaw & Hinson, in Charlotte, N.C., who regularly advises nonprofit and their senior management and volunteer leaders.

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