Skip to main content
Philanthropy Journal Home

Philanthropy Journal News

State Registrations: Trust Your Customer but Verify

 | 
Kirk Swain

Kirk Swain

Kirk Swain

One sentence often strikes terror in the hearts of charitable organizations and their fundraising counsels: “Hi, I’m with the Attorney General’s Office and I’d like to speak to you about your fundraising letter.”

If your job involves planning, managing, overseeing or implementing charitable solicitations and you are absolutely certain that you (as fundraising counsel) and your client are in full compliance with every state’s registration requirements, then go ahead and skip reading this article. But, if you are even slightly unsure about how up-to-date you or your client might be when it comes to establishing and maintaining proper registration in the states that require it, please read on.

As of this writing, 39 states and the District of Columbia require charitable organizations to register prior to making a solicitation. Of these, only Oklahoma, Colorado and Florida will not accept the Unified Registration Statement (URS).

The URS is a product of the Multi-State Filer Project, which is a well-intentioned – and Herculean – collaboration undertaken by the National Association of Attorneys General and the National Association of State Charities Officials. Its goal is to coordinate the charitable registration demands of most states and streamline and simplify the process for soliciting charities.

The result is an 85-page document that contains a 3-page registration, along with a preamble, 4 pages of instructions, 22 pages of supplemental state forms, 15 pages of appendices and 3 pages of help. The information filling the other 35 pages is not so easily categorized; however, interested readers can go to www.multistatefiling.org and read the complete document there. The website is both informative and helpful.

That completes the overview from the perspective of the charity. Not counting the personnel time needed to fill out the forms and file them, the cost to file is about $2,275.

For now, that is.

In July 2011, the Uniform Law Commission approved the “Model Protection of Charitable Assets Act.” The Uniform Law Commission consists of commissions on uniform law from all fifty states, the District of Columbia, and the territories of Puerto Rico and the U.S. Virgin Islands. When the Uniform Law Commission decides that a given body of law should be uniform throughout the country, they appoint a committee to draft model legislation.

Then, to achieve model act status, at least twenty state commissions must approve its passage. Once that quorum is reached, the model act is sent to all the state legislatures for consideration and adoption. Legislatures are urged to adopt the legislation exactly as written in order to promote uniformity in the law across all fifty states.

The Model Protection of Charitable Assets Act is designed to achieve four main purposes. First, it defines the authority of state Attorney Generals as it relates to the protection of charitable assets in a state. Second, it imposes registration requirements that are in addition to those registration requirements for charitable solicitation. Third, it mandates that charities with assets in excess of $50,000 must file annual reports with the Attorney General. Fourth, it requires a charity to report to the state in advance of certain specified “life events.”

In the words of the Uniform Law Commission,

The Model Protection of Charitable Assets Act articulates and confirms the role of the state Attorney General in protecting charitable assets. The Attorney General’s authority is broad and this Act will not limit or narrow that authority. The Act provides the Attorney General (the term is used in the act to mean the charity regulator in the state) with an inventory of basic information without overburdening the charities or the Attorney General with excessive reporting requirements.

As mentioned earlier in this article, when a model act is sent to the various state legislatures, it goes with a request that it be adopted verbatim in order to promote national uniformity. However, within each model act a number of lines of text are placed in brackets. These brackets specify textual locations where states can make modifications without changing the overall intent of the act.

In Section 4, paragraph (b), the act requires registration when a charity “… (3) holds charitable assets with a value in excess of $[50,000] in this state other than assets held primarily for investment purposes or (4) subject to subsection (d), conducts activities in this state for a charitable purpose.”

The act then goes on to provides a series of alternatives. The part identified as “End of Alternatives” says that “(d) The following activities, without more, do not constitute conducting activities in this state within the meaning of subsection (b)(4): … (6) making a grant, scholarship, or award to a person in this state[.][; and (7) soliciting or accepting contributions.]”

If you think that by virtue of this language you would be exempt from registration requirements because you have not met the $50,000 threshold, think again. Notice the brackets?

Further, if you think that you are exempt because the only activity you conduct in a state is soliciting and accepting funds – and that doesn’t constitute “conducting activities” – take another look. Notice the brackets?

The Uniform Law Commission has left the asset value threshold and the activity definition triggers for registration entirely up to the individual state Attorneys General, and many, if not most, will favor “casting a wider net.”

Among other reporting requirements, section (f)(2) requires “the name and address of the statutory agent of the person or the individual on whom service of process may be made.” Does this mean that charities will have to go to the additional trouble and expense of securing a resident agent in every state that adopts the law?

To date, no state has introduced or enacted the legislation, but that situation could change and it certainly bears watching. The act, as finally written and passed, can be found by going to www.uniformlaws.org and then searching “protection of charitable assets act.”

On the other hand, the fundraising counsel (FRC) does not have the option of using a unified, standard registration. The good news is that there are fewer states that make registration demands on FRCs. The bad news is that the fees, while fewer in number, are higher in total dollar amount. Currently, 29 states require FRCs to register, while 19 do not require registration. One state requires FRCs to submit contracts only and the remaining two are iffy, depending on how the FRC completes the forms.

The fees for FRCs to register, where required, will run approximately $5,405 (not counting the additional $100 and the $25 background check fee that Jefferson County, Kentucky imposes).

A good source for FRC registration requirements can be found at: http://www.givinginstitute.org/members/pdfs/spotlight10_issue1.pdf

Now that the requirements for FRCs and charitable organizations are defined, the question becomes, “Why should I register?” The simple, but compelling, answer to this question is: “It is the law.”

Believe me, the many people at the state level who enforce these laws take their jobs seriously. What’s more, they devote considerable time to the single task of uncovering instances of noncompliance. If these officials discover that an unregistered or improperly registered charitable organization has made a solicitation within their jurisdiction, then that party will be contacted.

It is no secret either that officials are more likely to impose fines whenever possible in these recessionary times. Fine amounts vary widely by jurisdiction; punishment also can include restitution to the state for prosecution, return of donations and even possible restrictions on future registration.

One last point is important: FRCs and their charitable clients are jointly responsible for making sure that each other’s registrations are current and complete. If a properly registered FRC helps an unregistered charitable organization send out an appeal, the FRC can expect to bear the brunt of whatever enforcement action the state hands out if the mailing comes to the attention of the folks in consumer protection.

By now you’re probably wondering “How does this guy know so much about the perils of failing to properly register?” I’ll tell you how: I got one of those phone calls years ago when a client had failed to renew a registration (despite assurances to the contrary). My advice: Trust but always verify.


Kirk Swain is a Principal of DirectMail.com, a metropolitan Washington, D.C.-based industry leader offering Agency, Data Products, Business Intelligence Insight, Email Marketing and Production services. For over 40 years, DirectMail.com’s unique Intelligent Marketing Process (Identify > Target > Contact > Acquire > Engage and Retain) has grown clients’ market share by applying strategies proven to increase customer and donor acquisition and retention. To contact Kirk, please e-mail KSwain@DirectMail.com or call 1-888-690-2252.

Leave a Response

Your email address will not be published. All fields are required.