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Does Your Not-for-Profit Need Registration in Different States?

by | Sep 18, 2019 | Tax and Accounting Desk

Many not-for-profit organizations use fundraising methods which cross boundaries of different states. If your not-for-profit is one of them, it may need registration in multiple jurisdictions.

a map of the United States and Canada with colored pins to signify the possibility of nonprofit organizations needing registration in various states

But keep in mind that registration requirements vary — sometimes dramatically — from state to state. So be sure to determine your obligations before you invest time and money in registering.

The Critical Activity
How do you know if your not-for-profit needs to register in other states? The critical activity is soliciting donations, not receiving them. So if your charity receives occasional contributions from out-of-state donors, you may not need to register in those states if you never asked for the contributions.However, email and text blasts and social media appeals are likely to be considered multistate solicitations.

Even so, a handful of state don’t require certain not-for-profits to register. For example, they may exempt houses of worship as well as not-for-profits with total annual income under certain thresholds. Other states may require charities to register but exempt them annual filing. All of the states have varying rules, income thresholds, exceptions, registration fees and fines for violations. Even the agencies that regulate charities differ by state.

No Easy Way
Unfortunately, there isn’t a simple way to register with every state. Most states require you to complete a general information form and submit it with:

  • Your last financial statement,
  • A list of officers and directors,
  • A copy of your originating document, and
  • Your IRS-issued tax-exempt determination letter.

Registration fees range from $0 to $2,000.

First-time registrants can use a Unified Registration Statement in most states. However, even those states mandate that annual renewals and reports be submitted using individual state forms.

Possible Consequences
If your not-for-profit fails to register in states where it raises funds, the consequences can be severe. Your organization, officers and board members could face civil and criminal penalties. Your charity might lose its ability to solicit funds in certain states or even lose its tax-exempt status with the IRS. Not-for-profits must also list the states where they’re registered on their Form 990s.

For some not-for-profits — particularly smaller organizations — cross-state registration requirements and potential penalties may lead them to limit fundraising to their own states. Contact your trusted advisor for help determining your registration obligations.

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