The Law of Fundraising. Bruce R. Hopkins

      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.

(n) Other Categories of Exempted Organizations

      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 forms⁵⁶ 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.

§ 3.6 REGULATION OF PROFESSIONAL FUNDRAISERS

      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).

§ 3.7 REGULATION OF PROFESSIONAL SOLICITORS

      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.

      The statutory bonding requirements for professional solicitors are as follows: $50,000, $25,000, $20,000, $15,000, $10,000, or $5,000.

The scope of these regulatory requirements is largely governed by the reach of the definition, under a state's charitable solicitations law, of the term professional solicitor.⁶⁰ The wide variation in these definitions is frequently confusing.

§ 3.8 REGULATION OF COMMERCIAL COVENTURERS

Several states have some form of law relating to the regulation of commercial coventuring; many of these states use the concept of the charitable sales promotion. A charitable sales promotion or commercial coventure is a promotion by a for-profit (commercial) business pursuant to which, during a stated period of time, a portion (usually identified as a percentage, perhaps with a cap) of the sales price of a good sold or service provided will be contributed to one or more charitable organizations. (The charitable deduction is available for the donating company, not the consumer.) Recently, this type of fundraising has been portrayed as embedded giving. These forms of regulation emphasize disclosure of information about the promotion to the public; other requirements are registration of commercial coventurers, a contract with the charitable organization and commercial coventurer, formal consent from the charity, and/or a report from the commercial coventurer.

      A bond for commercial coventurers may be required; the bond amount is likely to be set at $10,000.