Starting and Managing a Nonprofit Organization: A Legal Guide

By Bruce R. Hopkins | Go to book overview

CHAPTER TWELVE
Government Regulation
of Fundraising

Those who manage or advise nonprofit organizations are often unaware of all of the law—federal, state, and local—that is applicable to the organizations and the individuals involved.

Nowhere are the gaps in knowledge more pronounced than in the field of fundraising regulation. The sheer magnitude of state governments’ regulation of charitable gift solicitation is often underestimated, even unknown. The role of the federal government when it comes to the regulation of some aspects of nonprofit organizations’ fundraising functions is a best-kept secret. Governmental regulation of fundraising is becoming so pervasive and onerous, and yet so misunderstood and even ignored despite its rapid growth, that it is next to impossible to place this body of law in some meaningful context.


FUNDRAISING REGULATION AT STATE LEVEL

Governmental regulation of fundraising traditionally has been at the state level. Forty-six states have some form of a charitable solicitation act (a statute regulating charitable fundraising). Many counties, cities, and towns compound the process with similar ordinances. As discussed further on in this chapter, the federal government has also become heavily involved in the regulation of fundraising for charity.

The scope of the laws on fundraising is grossly misunderstood. Most fundraising charitable organizations know that they must comply with the charitable solicitation act (if any) of the state in which they are principally located. They may not know, however, that these laws frequently mandate compliance by professional fundraisers, commercial co-venturers, and others who assist in fundraising endeavors, or that they are expected to adhere to the law in each state in which they are soliciting funds. A charitable organization that is fundraising in all the states must be in compliance annually with the laws of 46 of these states. In addition, those who aid charities in their fundraising programs must comply with these laws. Administrators of county and city ordinances on fundraising usually expect the nationwide charities to comply with them as well.

What does compliance with these laws mean? Compliance varies from state to state, but essentially it means that a charity must obtain permission from the appropriate regulatory authorities before a fundraising effort can begin. The permission is usually termed a permit or license, acquired as the result of filing a registration. Most

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