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FAQs

Does a charity need to register with states that they receive government or foundation grants from?

The simple answer is yes, especially if your charity solicits donations in the state.

Does my charity need to complete an annual Audit?

Not all charities are required to complete an annual audit, however, there are certain circumstances that may require one to be done. Amongst which include:

  • If your charity receives money from the federal government and expends over $750,000 yearly.
  • If your charity receives state funding.
  • About 26 states require charities to submit a copy of audited financial statements before they can legally be allowed to solicit for contributions from their residents.

All in all, charities are more likely to be audited than for-profit companies. Failure to substantiate tax-exemption and even erroneous certificates could trigger an audit.

Can my charity get sales tax exemptions in other states?

Statutes governing sales tax exemptions vary from state to state. Furthermore, states regularly change sales tax rules and that could also vary from jurisdiction to jurisdiction. It is therefore incumbent upon your charity to do specific research or hire a charity registration firm to get it done.

My charity is no longer soliciting in a state that we are registered in - do we need to withdraw our registration?

It is important to maintain good standing with all states, as such, it is advisable to formally withdraw your registration from a state you are no longer soliciting contributions.

What is a Registered Agent?

A registered agent is an individual or agency your organization appoints to receive official notices on your organization’s behalf. A registered agent must have a physical address with a street address where an organization can be contacted or served with official notification of actions, correspondence from the Secretary of State, tax authorities etc. Charities are required by law to have a registered agent in each state where they are registered to operate.

Can I serve as my own Registered Agent?

The answer to that is yes, but it is probably not a good idea. For one, an agent needs to have a physical address within the state of operation. Agents are required to keep regular business hours. You definitely never want to miss an important notice.

What is Foreign Qualification? (Certificate of Registration, Certificate of Authority)

Foreign qualification is the process of registering your organization in other states other than where it was originally formed.

When does my business need to foreign qualify?

If you intend to operate out of the state where your nonprofit is incorporated, you will need to foreign qualify in each state you intend to operate.

What are annual reports?

It is simply a declaration or publication of the state of a charity in the past year. It often includes an income statement, balance sheet and a cash flow statement.

Are we required to file an annual report?

Almost all nonprofit entities are required by the IRS to file and annual report or Form 990.

When must charities register to solicit charitable donations?

State statutes usually require organizations to register with the state before they can solicit contributions. Statutes vary from state to state as far as what organizations are exempt from registration and if there is a grace period whereby an organization can solicit contributions without incurring penalties.

Can a nonprofit fundraise before it has tax-exempt status?

Yes but in this case donations could be considered income, hence taxable. If you must solicit for contributions before being granted tax-exempt status, you should let your donors know that you are pending approval.

Do fundraising counsels or professional solicitors need to register with the states?

Fundraising counsel and professional solicitors are independent contractors who help with fundraising. While the professional solicitor actively solicits donations on behalf of a nonprofit, a fundraising counsel just offers advice on managing your charitable campaign. About 45 states have statutes stipulating professional solicitors to register and provide copies of their contracts before soliciting. Requirements for fundraising counsel are typically the same but less stringent.

We take contributions online. Do we need to register?

Technically, if you have a page that asks for donations, potential donors could come from any state, thereby subjecting you to state statutes that govern soliciting from its residents.

What is a charitable gift annuity?

A charitable gift annuity, is a contract between a donor and a charity, whereby the donor transfers an asset to the charity in exchange for a tax deduction and lifetime fixed sum payments from the charity. The charity assumes ownership of the asset upon the death of the donor.

What is Commercial Co-venture?

Commercial co-venture, which also falls under cause-related marketing, is an agreement between a for profit and nonprofit organizations, whereby the for profit organization launches a sales campaign with an agreement to donate a portion of the purchase price to the non-profit organization.

Do Commercial Co-venturers need to register?

Over 30 states have statutes governing commercial co-ventures. The charity that goes into the commercial co-venture must be registered in applicable states, except if it is within a general exempt category. The for profit entering into a CCV agreement with a non-profit will be required to complete CCV registrations in AL, MA, MS, SC and possibly CA. Upon registration annual reporting will be required from several states. Most states require only the CCV campaign contract/agreement be submitted to them at reasonable amount of time before the start of the promotion/campaign.

What items should be included in a CCV agreement?
  • The goods or services that are to be provided to the public as part of the promotion
  • The geographic territory of the promotion
  • The actual or estimated dollar amount or percentage of the purchase price or sales that the charity will receive
  • The terms (start and end dates) of the promotion
  • The provision of a final accounting to the charity
  • The date(s) when the funds will be transferred to the charity (within 90 days after commencement of campaign is required)
  • The contract requires signatures of two officers of the charity; only one from the CCV
Do any states require bonds when filing for CCV registration?

Alabama requires a bond of $10,000 and a $25,000 bond is required for the state of Massachusetts.