Online Giving: An Opportunity & Legal Pitfall

What do Blackbaud’s 2013 Charitable Giving Report, the 2013 Millennial Impact Report and the 2013 eNonprofits Benchmark Study have in common? More and more donors are donating online. All three reports announced double-digit increases in the percentage of online gifts received in 2013 over 2012. The Boston Marathon bombings, Midwest storms, Philippines’ typhoon disaster and #GivingTuesday are cited as key drivers in increased online giving, however, the trend also reflects a cultural shift in philanthropic values and donor engagement. Having a “Donate Now” button on your nonprofit’s website has become a requirement for any nonprofit that wishes to grow its donor support.

But, online donations present a unique legal challenge for nonprofits. Every nonprofit must register in any state where it conducts fundraising activities. So what does an organization do when faced with the prospect of online giving and soliciting gifts nationally – or worldwide? Do you register your organization in all 50 states?

In response to these questions and as an effort to minimize charitable solicitation fraud through the internet, a group of attorneys and state charity officials convened as The National Association of State Charity Officials (NASCO) and defined a set of guidelines for internet fundraising known as The Charleston Principles (visit www.afpnet.org for details).  The following is a summary of the principles to help determine when and where your organization needs to register:

• Every nonprofit must register in the state identified in its principal place of business address. If you are hosting fundraising or educational events where donations are accepted or soliciting local volunteers and donors, your non-Internet activities alone require registration in your home (“domicile”) state.
• Every nonprofit using an interactive website (“Donate Now!” button) should register, at minimum, in its home state with the assumption that most of the online gifts received will come from your surrounding proximity.
• If your organization specifically targets persons physically located outside of your home state – either by email or website – it must register within that targeted state. Clarification: If your organization receives a handful of donations from donors located outside of your state, there is no need to register in the donors’ states. If, however, your organization later sends an email  appeal requesting a second donation from one of those donors located outside of your state then  your organization is targeting persons physically located outside of your home state and would be required to register with the donor’s state.
• If your organization receives online contributions from persons located outside of your home state on a repeated, ongoing basis or of a substantial amount, it should be registered within those states where the online donors are located. Clarification:  As an example, if a donor from Nevada makes a $50,000 online donation to your California-based organization (a gift that represents 25% of your total annual funds received), such gift would be considered “substantial” by the Internal Revenue Service and require your organization to register with the state of Nevada.

Keep your nonprofit current with these 5 online giving trends.