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On-Line Fundraising – What Your Nonprofit Needs to Know

“Donate Now.” Those two words appear on just about every nonprofit’s website.  For the typical nonprofit, it is a comparatively easy way to raise funds.  The organization doesn’t have to send out a letter asking for donations, and the only cost to the donations made online are credit card processing charges.

In order to minimize the staff time involved in handling online donations, many nonprofits use a hosting service, such as Network for Good, PayPal and Razoo.  For a percentage of the donation, these services will host a fundraising page for your organization, process donations, and in some cases, send out donor acknowledgements.  Other nonprofits process the donations through their own website.

No matter which approach a nonprofit takes, the first question is:  are there any legal issues involved in soliciting online donations? The answer is maybe.

Under the laws in 41 states and the District of Columbia, a charitable organization must register with the state before they solicit donations from persons living in the state.  This includes direct solicitations by mail, email, radio, television, and telephone, fundraising events, raffles, silent auctions, in-person requests for donations, and in most states, corporate solicitations and applications for foundation and government grants.  The registration requirement is triggered by asking for a donation, whether or not the request is successful. There are very limited exceptions to these laws. As a general rule, the statutes are broadly drafted to pick up the bulk of charitable organizations and the methods used for soliciting donations.

However, “donate now” donations are often treated differently.  In many cases, the nonprofit is not actively soliciting contributions through its website.  Instead, the donor seeks out and finds the nonprofit to which it wishes to donate.  Maybe the donor has heard about the nonprofit through a friend.  Maybe the donor is originally from the D.C. area, and wants to donate to an organization with a particular mission. Maybe a member of the donor’s family has been helped by the nonprofit, or a family asks well wishers to make a memorial donation in the name of a deceased loved one.  In each case, the nonprofit may have done nothing to specifically target the particular donation.  If the donor is from out-of-state, does accepting the donation require the nonprofit to register with the state where the donor lives?

Often times, the answer is no. In 2001, a group of state charity officials got together and drafted what are known as the Charleston Principles.  These are advisory guidelines followed by most states that require charitable registration. The principles provide that:

    A nonprofit located within a state that uses the Internet to solicit charitable donations in that state must register.  This is true without regard to whether the Internet solicitation methods it uses are passive or interactive, maintained by itself or another entity with which it contracts, or whether it conducts solicitations in any other manner.
    A nonprofit must also register if it specifically directs potential donors in a state to the “donate now” button on its website.
    However, a nonprofit not located within a state is not required to register in that state if the nonprofit only solicits through a “donate now” button on its web site, unless the nonprofit:
            Specifically targets persons in the state for solicitation, or  
            Receives contributions from the state on a repeated and ongoing basis or a substantial basis through its web site.

To receive contributions from the state on a repeated and ongoing basis or a substantial basis means receiving contributions within the entity’s fiscal year that are of sufficient volume to establish the regular or substantial nature of those contributions.

For example, suppose a D.C. nonprofit has 50 donors from West Virginia who make monthly donations through its website. That may be considered sufficient to require registration in West Virginia, even though the nonprofit is not actively soliciting the donors.

As another example, suppose there is a natural disaster in Maryland, and as a result a nonprofit that is assisting people impacted by the disaster receives an influx of donations from people who grew up in Maryland, but now live in New Jersey.  If the total amount of these donations is substantial, they may require the nonprofit to register in New Jersey.

But keep in mind, even if a donation does not trigger the registration requirement, any follow up solicitations to that donor would.  So, if you send a fundraising email to a donor from Pennsylvania who made a one-time donation through your website, your nonprofit is now actively soliciting donations in Pennsylvania, and may have to register.

The Charleston Principles are designed to assist nonprofits, so that a nonprofit does not have to register just because it received an unsolicited donation through its website of, say $50, from someone in another state.  However, not every state follows the Charleston Principles, so be sure to check with state government offices to determine if you have to register.

For more information about charitable solicitations, please see:

    Webinar: Soliciting Charitable Contributions in DC, Maryland, and Virginia
    “Charitable Solicitation Registration” from The National Council of Nonprofits