Online Fundraising

Navigating the Legal Requirements

An article I wrote regarding nonprofit online fundraising was recently published by the Massachusetts Nonprofit Network.

Online fundraising is vital for nonprofits seeking to broaden their donor base. But while the technology grows ever more sophisticated, the legal requirements can be difficult to navigate.

Charities that wish to fundraise in Massachusetts and most other states have always had to comply with the fundraising registration requirements of the states in which they solicit contributions. The registration rules were easy to follow until online fundraising emerged. Existing laws did not take into consideration the globalizing impact of the Internet. State geographic boundaries became meaningless when “donate here” buttons could attract donations from anywhere.  Was online fundraising considered solicitation in every state, some states, or not solicitation at all?

Despite early efforts by state regulators to establish principles for complying with state registration requirements in this new environment, the challenge was daunting.  With the advent of “crowdfunding” and platforms such as AmazonSmile, Charitybuzz, and Network for Good offering a wide array of fundraising services, the legal situation has become even more complex.

In order to stay legally compliant, you need to understand certain basic principles regarding state fundraising registrations.  You need to review the “terms of use” of online platforms to learn which are, and which are not, “donor-advised funds,” and the implications of each. You need to understand which types of online activities (emails, social media posts) trigger registration requirements, and which do not. You still need to comply with traditional rules when it comes to providing written acknowledgments and managing donor expectations about the use of their contributions.

While there may still be guesswork—and you’ll need to balance certainty with practicality—compliance is critical to maintain your tax exemption and the trust of your donors.

You can read my full article here.

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Ellen Lubell provides guidance to nonprofits on regulatory compliance, risk management, governance, fundraising, and best practices for preserving tax-exempt status.