The Law of Fundraising. Bruce R. Hopkins

A loan is not a contribution, including a loan to a charitable organization. If a person makes a loan to a charity, with the intent to subsequently forgive it, and the amount of the loan, or a portion of it, is subsequently forgiven, the amount forgiven becomes a contribution as of the date of forgiveness. As noted, a single transaction can embrace both the elements of a contribution and a sale.²⁶

Essentially, the concept in this context is that a contribution is a payment to a charitable organization where the donor receives nothing of material value in return.²⁷ Thus, a court ruled that a state's charitable solicitation act did not apply to the solicitation of corporate sponsors for a marathon, stating that the transaction was a “commercial” one, “[i]t is not a gift,” “[i]t is a corporate opportunity,” and “[i]t has nothing to do with philanthropy.”²⁸

The amount or value of a charitable contribution may be pertinent in the application of a state's charitable solicitation act. Certain small solicitations are often exempted from these acts. These determinations are made on the basis of the monetary value of the gifts in the aggregate.²⁹ In most instances, these calculations are made on the basis of (i.e., are confined to) the payments, or portions of payments, that are in fact contributions.

(f) Membership

The states' charitable solicitation acts often define the word membership or member. The principal purpose, when this definition is given, is to define the term in relation to the exclusion for solicitations that are confined to the membership of the soliciting organization.³⁰

      The statute may define the term membership to mean those persons to whom, for payment of dues, fees, assessments, and the like, an organization provides services and confers a bona fide right, privilege, professional standing, honor, or other direct benefit, in addition to the right to vote, elect officers, or hold offices.

      This type of statute is likely to add the point that the concept of membership does not extend to those persons who are granted a membership upon making a contribution as the result of a solicitation.

(g) Professional Fundraiser

      There is considerable confusion about the meaning of the term professional fundraiser. The dilemma arises from the fact that the term, and its nemesis professional solicitor, was developed in an era when the roles of the parties were discrete and thus much easier to identify. Basically and historically, a professional fundraiser was a consultant—an individual or firm that did not directly participate in the solicitation process but rather who worked with the charity in designing the fundraising plan. In most cases, the charitable organization was the person that undertook the actual fundraising, using volunteers. By contrast, a professional solicitor was a person who was paid to solicit gifts in the name of the charity.

      During this era, the roles were separate and distinct. The fundraiser planned and did not solicit. The solicitor pursued gifts and was not involved in planning the campaign. In many instances today, that formal dichotomy is followed. Increasingly, however, the roles are being blurred, usually because the professional fundraiser is undertaking one or more roles in the area of solicitation.

Most states adhere to a definition such as this: a professional fundraiser is any person who, for a flat fixed fee under a written agreement, plans, conducts, manages, carries on, advises or acts as a consultant, whether directly or indirectly, in connection with the solicitation of contributions for or on behalf of a charitable organization. This type of definition usually is followed by the admonition that a professional fundraiser may not actually solicit contributions as a part of the services.

Often excluded from the ambit of the term professional fundraiser are the officers and employees of a registered³¹ or exempt³² charitable organization. Also usually excluded from the term are lawyers, investment counselors, and bankers, even if they advise a client or customer to contribute to a charitable organization.

      Some states use a definition of the term professional fundraiser in a different manner, with some, as discussed as follows, having a definition of the term that also encompasses most categories of professional solicitors. About a dozen of the states' laws lack any definition of this term.

      Part of the reason for the confusion in this area is the variation in terminology among the states. In about one-fifth of the states, the person usually generically referenced as a professional fundraiser is identified by means of that term. Other states, however, intending the same meaning, use the term professional fundraising counsel. Still other states prefer fundraising counsel. Other terms used in various state laws are fundraising consultant, professional fundraiser consultant, and professional fundraising consultant.

Presently, the state laws regarding fundraising regulation reflect considerable misunderstanding of the meaning of the term professional fundraiser in relation to the term professional solicitor.³³ As noted, some state laws so broadly define professional fundraiser (or equivalent term) that the term includes what is normally meant by professional solicitor. Terms used to describe a professional solicitor include phrases such as professional fundraising firm, professional commercial fundraiser, and commercial fundraiser for charitable purposes. A few states use the term professional fundraiser to describe what is generically meant by the term professional solicitor.

(h) Professional Solicitor

      The discussion about the traditional and contemporary roles of professional fundraisers and professional solicitors is to be recalled, in understanding the confusion between the two terms as seen from the perspective of the term professional solicitor.

The term professional solicitor is generally defined in a state charitable solicitation act in one of two ways.

      Most states define the term professional solicitor to encompass one of three types of persons or relationships. One is a person who, for a financial or other consideration, (1) solicits contributions for or on behalf of a charitable organization, where the solicitation is performed personally or through agents or employees; or (2) solicits through agents or employees specially employed by or for a charitable organization, who are under the direction of such a person. The other is a person who, for a financial or other consideration, plans, conducts, manages, carries on, advises, or acts as a consultant to a charitable organization in connection with the solicitation of contributions but does not qualify as a professional fundraiser (or equivalent term).

      When this definition (or something comparable to it) is used, about one-half of the states employ the term professional solicitor. A few use the term paid solicitor. Other phrases used are professional commercial fundraiser, professional fundraising firm, paid fundraiser, and commercial fundraiser.

      This definitional approach is usually accompanied by exclusions for officers, employees, lawyers, investment counselors, and bankers. On rare occasions, there will be other exclusions, such as for persons whose sole responsibility is mailing fundraising literature.

      Some states define the term professional solicitor to mean any person who is employed or retained for compensation by a professional fundraiser to solicit contributions for charitable purposes. With this definition, the terms