Your Donate Button Might Be Breaking the Law in 39 States
What every nonprofit needs to know about charitable solicitation registration before they ask anyone for money.
Here is a question many nonprofit executives have never fully thought through:
When a donor in California visits your New York-based nonprofit's website and clicks your Donate button, have you just solicited a charitable contribution in California?
The answer, in most cases, is yes. And California requires you to be registered before you do that.
So does Illinois. And Pennsylvania. And Massachusetts. And roughly 38 other states.
The rule most nonprofits don't know they're breaking.
Currently, 41 states and the District of Columbia require nonprofits to register in advance of engaging in any fundraising or solicitation activity. This is known as charitable solicitation registration, and it applies regardless of how the solicitation happens.
Whether your nonprofit fundraises through a website, social media, texting, grant applications, personal asks, phone calls, direct mail, giving days, crowdfunding, or other means, it is considered soliciting under the law and triggers a duty to register.
That last part is worth reading again. A donate button on your website, a Giving Tuesday social media post, a grant application to a foundation in another state. These actions may count as solicitation under most state laws, and those laws likely require registration before you ask.
The entity does not have to be physically present in a state to be soliciting. Sending a letter or an email across state lines could be enough to trigger "solicitation".
But we're a small local nonprofit. Does this really apply to us?
This is the question every regional or community-based nonprofit should ask. The answer? It depends.
The registration requirement is not triggered by where your organization is located. It is triggered by your donors' locations. If your organization is in New York and you send a direct mail appeal to a list that includes donors in New Jersey, you may have just solicited in New Jersey. If a board member posts your crowdfunding campaign to their personal Facebook page and a friend in Connecticut donates, you may have just solicited in Connecticut.
Most state charitable solicitation statutes were written prior to the Internet age and were written with more traditional forms of solicitation in mind. There are a few states that require registration only if a nonprofit is engaged in specific activities or seeks assistance from professional fundraisers. Most states cast a wide net.
There are meaningful exemptions of which to be aware, such as revenue thresholds. For example, New York does not require registration until a charity receives in excess of $25,000 from New York donors specifically. Connecticut's threshold is $50,000 in total contributions from all states. Some states exempt religious organizations, membership organizations, and educational institutions. Because the specific exemptions vary widely, the burden is on your organization to know whether you qualify.
The Charleston Principles and online fundraising.
Many of these laws predate the internet, and so there has been genuine confusion about when a website-based solicitation crosses into a regulated activity in a given state. In 2001, the National Association of State Charity Officials adopted a set of guidelines known as the Charleston Principles to address exactly this question.
Under the Charleston Principles, registration is generally required in a particular state in two scenarios: first, when the charity specifically targets a person in a particular state, such as sending an email to someone the sender knew or should have known resided in that state; and second, when the charity engages in passive solicitation, such as a Donate button on a website, but receives substantial or repeated and ongoing contributions from residents of that state.
The bottom line is this: If you have a Donate button on your website and you are receiving consistent donations from residents of a particular state, your organization may need to be registered to solicit in that state.
The registration process.
State laws, forms, and requirements are always changing. Registering to solicit in some states is straightforward, while in others it is more complicated. Massachusetts, for example, has four separate forms for in-state and out-of-state entities depending on whether they are registering before or after their initial fiscal year-end.
Most registrations require:
- Completed state-specific registration forms
- A copy of your organization's IRS determination letter
- A copy of your organization's most recent Form 990
- Documents such as articles of incorporation and bylaws
- A filing fee, which varies by state and often by revenue size
- In some states, the appointment of a registered agent with a physical address in that state
- Annual renewal, typically tied to your fiscal year
The cost of filing fees plus labor for preparing and submitting forms can be hefty for nonprofits seeking to register in all the states where registration is required. This is why many organizations outsource the process to specialists.
What happens if you don't register?
State penalties for unlicensed solicitation are diverse and can be severe. Soliciting prior to registering, failure to register after receiving funds, filing late renewal applications, or facing complaints filed by the public can all trigger adverse consequences, including fines and the possibility that a state bars your nonprofit from soliciting donations within that state.
Beyond fines, there is a practical consequence that matters more to most organizations: many grant-making foundations and government funders require proof of charitable solicitation registration before they will consider an application. If you are not registered in the state where a foundation is headquartered, you may be ineligible to apply.
A practical framework for thinking about your exposure.
Not every organization needs to register in all 41 jurisdictions immediately. A qualified nonprofit attorney could offer your organization a risk-based approach, such as:
Register first in states where you know you have donors. Review your donor database. If you have consistent donors in California, Illinois, Pennsylvania, Florida, or other high-population states, those should be your priority.
Register before you launch any active multi-state campaign. If you are planning a Giving Tuesday campaign, a year-end appeal, or any direct mail that will reach donors outside your home state, register in those states first.
Review your exemption status annually. Revenue thresholds, organizational exemptions, and state requirements change. What exempted you last year may not exempt you this year.
Use a service if the volume is unmanageable internally. Firms like Harbor Compliance and Labyrinth specialize in managing multistate charitable registrations and renewals. For organizations registering in more than a handful of states, the cost of outsourcing is usually lower than the staff time required to manage it internally.
The bottom line.
Charitable solicitation registration is one of those compliance requirements that sits quietly in the background. Many nonprofits are operating in some degree of non-compliance without even knowing it, and most regulators are not actively hunting small organizations. But enforcement is increasing, grant funders are paying attention, and the cost of getting caught will always exceed the cost of getting registered.
If your organization has a website with a Donate button, you are almost certainly soliciting in multiple states. The question is whether you are registered to do so.
This post is provided for informational purposes and does not constitute legal advice. For guidance specific to your organization, consult a qualified nonprofit attorney or contact a charitable registration compliance specialist.