Did You Know? Some States Require 501(c)(4) Organizations to File Charitable Solicitation Registrations
As the prominence and number of outside groups—particularly 501(c)(4) social welfare organizations—has steadily grown over the past several years, so too has the focus on 501(c)(4) organization compliance. One such compliance issue that has gained attention is state charitable solicitation registration, because the IRS Form 990 requires nonprofit organizations to disclose the states in which they are authorized to solicit donations.
What is State Charitable Solicitation Registration? Thirty-nine states plus the District of Columbia currently require nonprofit organizations to register and file annual reports with state agencies if the organizations would like to solicit donations in their jurisdictions. These state laws were designed to prevent fraud in connection with charitable organizations and are often enforced by state attorneys general or secretaries of state.
Why Are 501(c)(4) Social Welfare Organizations Subject to Charitable Registration Laws? The term “charitable solicitation registration” is a misnomer. Many of the states with charitable solicitation registration laws do not limit the application of their laws to 501(c)(3) charitable organizations and broadly define “charitable” to encompass a variety of different nonprofit organizations.
In Ohio, for example, “charitable organization” is defined to include an organization that is “established for any benevolent, philanthropic, patriotic, educational, humane, scientific, public health, environmental conservation, civic, or other eleemosynary purpose.” In addition, Ohio's charitable solicitation registration law specifically states that its application is “not limited to only those organizations to which contributions are tax deductible” (i.e., 501(c)(3) charitable organizations).
Because each state's definition of “charitable organization” and interpretation of its charitable solicitation registration requirements vary, 501(c)(4) organizations should separately consider whether they must register in each particular state.
When Should 501(c)(4) Social Welfare Organizations File Charitable Solicitation Registrations? Nearly all of the states with charitable solicitation registration laws require nonprofit organizations to register prior to soliciting any donations in their jurisdictions. At the outset, a 501(c)(4) organization should consider its anticipated fundraising activities in each state. It may not be necessary, for example, for a Virginia-based 501(c)(4) organization with a regional fundraising focus to file charitable solicitation registrations in Western states. After determining where it should initially register, a 501(c)(4) organization should be mindful of changes to its fundraising activities that may necessitate filing charitable solicitation registrations in additional states.
What Information Must Be Disclosed on Charitable Solicitation Registrations? As a general matter, state charitable solicitation registration forms require a 501(c)(4) organization to disclose information about the organization's purposes, fundraising activities, officers and directors, and persons with custody of donations or check-writing authority. Most states require a 501(c)(4) organization to file a copy of its articles of incorporation, bylaws, tax exemption determination letter, or application for tax exemption as part of its initial registration.
Most states also require nonprofit organizations to renew their registrations on an annual basis if they would like to continue soliciting donations in that state. And although several dozen states permit a 501(c)(4) organization to file its initial registration on the “Uniform Registration Statement,” each state has additional requirements for initial registration, and registration renewals are typically required to be filed on state-specific forms.
Finally, nearly all of the states with charitable solicitation registration laws require some form of annual financial reporting. These reporting requirements may be folded into the registration (and re-registration) process or may consist of an entirely separate report. Typical financial reporting requirements are very similar to what the IRS Form 990 requires. Some states even time the financial reporting deadlines to coincide with the Form 990 deadlines. Please note that it is not uncommon for states to require a nonprofit organization with a certain level of financial activity to file a copy of its audited financial statements (which effectively requires organizations to conduct annual audits) as well as a copy of its Form 990.