Registration For Charities That Solicit
Almost everyone has been pestered by a phone call, doorbell ring, or an in-person ask for a donation to a charity. But, what you may not have realized is that before most non-profits, and contractors who help them raise funds, can solicit, or help socilict doantions, they must first register with the state. This process helps ensure that donations are used properly.
Solicitation is essentially asking a person to give money or to buy something. The Solicitation of Funds for Charitable Purposes Act governs such asks in Pennsylvania. Nonprofits generally do not make money aside from donations, so charities tend to rely on solicitations and grants to keep operating. Thus, most charities must register with the state within which they are soliciting. The full langauge of the act, including the definition of solicitations is found: here.
In Pennsylvania, 501(c)(3)’s must sometimes submit a Bureau Charitable Organization Registration Statement, otherwise known as a BCO-10. The Pennsylvania Solicitation of Funds for Charitable Purposes Act, 10 P. S. §162.1 et seq., requires organizations soliciting charitable contributions from Pennsylvania residents to register. Instructions to the BCO-10 can be found here. The instructions have a line-by-line break down the BCO-10 form. Also, the instructions define all the major terms. The registration must be sent to the Bureau of Corporations and Charitable Organizations and renewed annually.
There are many attachments that must be included with this form. The organization's IRS 990 Return must accompany the BCO-10. If the organization does not file a 990, the organization must submit the Pennsylvania Public Disclosure Form, the BCO-23. Also, the organization must submit financial statements from the previous year.
Depending on how many contributions the company rises, the company will have to submit internally prepared, compiled, reviewed or audited financial statements from the previous year. Additionally, copies of the IRS letter stating the company’s tax exemption will need to be provided along with organizational documents such as articles of incorporation and by-laws. Companies must inform the Bureau within 30 days of changes to the information submitted.
Registrants must also send a check. The amount of the check depends on how many funds were raised in the previous year. Companies that solicit less than $25,000 gross have a $15 fee. Companies that solicit more than $500,000 must pay $250.
However, there are many exceptions that make filing a Registration Statement optional. These exceptions are detailed in this chart. But, to summarize, an organization that receives less than $25,000 in contributions per year is exempt. Also, most police, firefighters, teacher associations, veterans groups, hospitals, libraries, education programs, religious institutions, and senior citizens’ homes are exempt.
The company must register once an employee will be compensated for soliciting or within 30 days of receiving more than $25,000 in contributions. The registration must be sent a month and a half before the end of the company’s fiscal year. There is no electronic submission. The postmark date is the day that the Bureau will consider for timeliness. Late registrations will incur a late fee ($25/month) and have a gap in its registration.
Professional Solicitors and Counselors
Another often unknown requirement, is that Contractors who help non-profits raise funds, must also register. The Solicitation of Funds for Charitable Purposes Act, 10 P. S. § 162.1 et seq ., (Act) requires professional solicitors and Fundraising Counsels to register with the Bureau of Corporations and Charitable Organizations (Bureau) prior to soliciting for charitable organizations in Pennsylvania, or aiding the organization in doing so. If they do not register, they can be fined up to $1,000 per violation and assessed additional penalties of up to $100 per day. Registrations must be renewed annually.
So what are professional solicitors and fundraising counsels?
Professional Fundraising Counsels are any person who is retained by a charitable organization for a fixed fee or rate under a written agreement to plan, manage, advise, consult or prepare material for or with respect to the solicitation in this Commonwealth of contributions for a charitable organization, but who does not actually solicit the contributions themselves or through contractors and who does not have custody or control of contributions.
Professional Solicitors are any person who is retained for financial or other consideration by a charitable organization to solicit contributions within Pennsylvania for charitable purposes directly, or in the form of payment for goods, services or admission to fundraising events, whether such solicitation is performed personally or through his/her agents, contractors, employees or through agents, contractors, or employees especially employed by or for a charitable organization for such purpose, or a person who plans, conducts, manages, carries on, advises, consults, whether directly or indirectly, in connection with the solicitation of contributions, sale of goods or services or the production of fundraising events for or on behalf of any charitable organization, but does not qualify as a professional fundraising counsel within the meaning of this act. A person who is otherwise a professional fundraising counsel shall be deemed a professional solicitor if his compensation is related to the amount of contributions received.
Both definitions do not include a bona fide salaried officer or regular, nontemporary employee of a charitable organization shall not be deemed to be a professional fundraising counsel provided that the individual is not employed or engaged as professional fundraising counsel or as a professional solicitor by any other person.
So the main difference is that counsels do not directly solicit, and professional solicitors do, however, as you can see there are also some nuances, so it's important to know which definition you fall into.
Both professional solicitors and fundraising counsels have to also submit any contracts with charitable organizations at least 10 days before the contract is to begin. These contracts are required to have specific provisions based on if you are a solicitor or counsel, and must be approved by the state prior to the work.
For counsels, those requirements can be found: here. For solicitors: here. The state can reject the contract and require edits if it does not contain the proper langauge. Furthermore, if a contract is extended beyond the original termination date, the state must approve the extension.
Finally, solicitors must also file a financial report within 90 days after a solicitation campaign or event has been completed and on the anniversary of the commencement of a solicitation campaign lasting more than one year. This financial report must list the gross revenue from the campaign or event and an itemization of all expenses incurred.
Therefore, the next time you get asked to donate to a nonprofit, you can be sure that the organization and those helping it raise money are being monitored by the state. We hope this blog was helpful and provides information for organizations and contractors working with non-profits on soliciations. Remember it's always important to get legal advice specific to your situation, as this blog just provides an overview. If you need more assistance, we are always here to help.
DISCLAIMER: This blog is meant for informational purposes only and does not constitute specific legal advice or create an attorney-client relationship. Readers should discuss their specific situation with an attorney.