Bruce R. Hopkins - The Law of Fundraising

Thus, a charitable solicitation statute may make this exemption available for persons requesting contributions for the relief of any individual specified by name at the time of the solicitation when all of the contributions collected without any deductions whatsoever are turned over to the named beneficiary for his or her use. As this phrasing indicates, this exemption is usually voided where professional fundraising assistance is used.

As discussed, this type of exemption is often in conflict with the concept of solicitations for charitable purposes.

Rarely will these solicitations be exempt from the totality of the charitable solicitation act.

Some states exempt political organizations from the entirety of their charitable solicitation acts. Others exempt political organizations from the registration and reporting requirements of their acts. This is one of those exemptions that need not be stated, in that fundraising for political organizations is always outside the ambit of a state's charitable solicitation act. 54

Several states exempt veterans' organizations from the registration and reporting requirements of their charitable solicitation acts.

Some state charitable solicitation acts provide exemption—usually only from the registration requirements—for organizations identified by name. 55

This practice is evidenced in provisions granting this type of exemption to the American Red Cross, boys' clubs, named educational institutions, Boy Scouts and Girl Scouts organizations, girls' clubs, the Junior League, Young Men's and Young Women's Christian Associations, and a children's trust fund.

The state charitable solicitation acts contain exemptions—usually from the registration requirements—for a variety of other categories of charitable organizations. The scope of these exemptions is vast: some expressly mandate a filing requirement for the exemption, solicitations only by volunteers, no private inurement, solicitations only of members, and other limitations.

This type of exemption, albeit with some restrictions in some states, may be extended to include firefighting organizations; fraternal organizations; social groups; patriotic organizations; historical societies; civic organizations; nonprofit nurseries or other children's groups; certain organizations receiving an allocation from community chests, united funds, and the like; federally chartered organizations; law enforcement groups; community service organizations; youth organizations; labor unions; business and professional associations; senior citizen centers; grange organizations; civil defense organizations; civil rights organizations; fraternities and sororities associated with a variety of organizations; debt counseling agencies; state-based charitable trusts; persons seeking contributions and grants only from corporations and private foundations; and persons seeking grants only from private foundations.

The law in a few states provides that a noncommercial radio or television station is exempt from the state's charitable solicitation act's registration requirements. There is the occasional exemption from registration requirements for organizations that do not have an office within the jurisdiction; that solicit in the state solely by means of telephone, telegraph, direct mail, or advertising in national media; and that have a chapter or affiliate that itself has registered in the state. A rare exemption from registration requirements is available for any charitable organization located outside the state, if the organization filed the registration documents required under the charitable solicitation laws of the state in which it is located, the registration documents required under the laws of other states, and such federal forms 56 as may be required by rule.

Other exemptions from the registration and/or reporting requirements may encompass any publicly supported community foundation or publicly supported community trust, state-based charitable trusts, civil defense organizations, noncommercial newspapers, or debt counseling agencies.

In a rare exemption, organizations of hunters, fishermen, and target shooters are exempt from the entirety of the charitable solicitation act.

An unusual provision may exempt from the registration and reporting requirements of a charitable solicitation act all charitable organizations that are tax exempt under federal law. 57 A state may have a similar exemption (albeit only from registration), although many categories of tax-exempt charitable organizations must file proof of their tax-exempt status with the state. In several states, solicitations for federal, state, and/or local governments are exempt.

A wide range of nonprofit, tax-exempt organizations are exempt from the states' charitable solicitation acts because these entities are not charitable as that term is defined in the applicable statutes.

The foregoing exemptions are not necessarily absolute or automatic. That is, in some states, a charitable organization (but not necessarily all categories of such organizations) must first secure a determination from the state regulatory authorities as to its status as an organization exempt from some or all of the charitable solicitation act's requirements; in some states, some or all of the exemptions are precluded or revoked where a charitable organization uses the services of a professional fundraiser; and, in some states, the exemption is precluded or revoked where a charitable organization uses the services of a professional solicitor.

The state charitable solicitation statutes often require a professional fundraiser, acting on behalf of a charitable organization that is subject to the particular statute, to register with the appropriate state agency and otherwise be in conformity with the statute. This registration must be completed before the professional fundraiser commences to act in that capacity for a charitable organization soliciting funds in the state.

The scope of this registration and of other regulatory requirements is largely governed by the reach of the definition, under a state's charitable solicitation law, of the term professional fundraiser . 58

This registration is usually effective for a period of one year, with expiration of the registration set to occur on a stated date, and is renewable.

Often, these laws also impose reporting requirements for professional fundraisers. A few state charitable solicitation acts mandate annual reports. The far more common practice is annual registration.

An applicant for this registration is usually required to file with and have approved by the appropriate state officials a bond in a statutorily set sum. These bond amounts are as follows: $25,000, $20,000, $15,000, $10,000, $5,000, or $2,500. These bonds inure to the benefit of the state in reimbursement for any losses resulting from malfeasance, nonfeasance, or misfeasance in the conduct of a professional fundraiser in connection with charitable solicitation activities. 59

Most of these statutes require professional fundraisers to maintain accurate books and records, and to do so for a stated period (generally, three years).

Usually, the states' charitable solicitation acts require professional solicitors to register in accordance with and otherwise comply with the statute. These laws often also impose a variety of reporting, disclosure, and other requirements. Thus, many states require annual (or sometimes other) reports from professional solicitors; the more common practice is annual registration. Some states require both.