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What to disclose — and what's a legal gray area

In order to receive tax exemptions and allow supporters to make tax-deductible donations, U.S. federal law requires nonprofits to make tax filings and other financial information available to the public. In most states, nonprofits that make public fundraising appeals — by mail, phone or online — must disclose additional information, including whether they're partnering with other companies (such as professional fundraisers).

What details must be disclosed?

The specific information that must be disclosed varies by state. In general, however, solicitation disclosures require:

  • A declaration that the most recent financial statements are available on request, at no cost other than the expense of copies and postage
  • The organization's name, address and contact information (to facilitate the request of financial information)
  • An indication of the organization's tax-exempt status and the percentage of donations that may be deducted from the donor's taxes
  • The intended use of the solicited funds

Some states have stricter rules regarding solicitations made on behalf of the police, firefighters and military veterans.

State law typically requires these disclosures to be included in all printed solicitation materials and offered verbally during phone solicitations. Online disclosures remain a legal gray area — but if solicitations are made by email, it's best to include a written solicitation disclosure.

What about contracts with professional fundraisers?

Many states require a disclosure when nonprofits contract with a professional fundraiser or solicitation firm. A professional fundraiser is usually a consultant who helps nonprofits develop fundraising plans, while a professional solicitor is generally a subcontractor who actually does the work of person-to-person fundraising — by mail, phone or online. In either case, contracts with the professional fundraiser or solicitor should be filed with the appropriate state agency.

Or commercial co-ventures?

If your organization partners with a for-profit company — a company, for example, that agrees to donate a portion of their sales to your nonprofit — you're engaging in a commercial co-venture. In a number of states, commercial co-ventures require additional registration and disclosures. This additional regulation accounts for the partnership benefits enjoyed by the for-profit company, such as improved branding.

Typically, this regulation is relatively straightforward — such as filing a copy of the contract between your organization and the for-profit company with the appropriate state authority (such as the attorney general or secretary of state). Failing to register can incur fines or penalties, so be sure to review your state's requirements before engaging in an enterprise of this sort.

This article draws on the expertise of Grace Davies, a Minneapolis-based attorney with special interest in product liability, medical malpractice and employment discrimination.

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Disclaimer

MissionBox editorial content is offered as guidance only, and is not meant, nor should it be construed as, a replacement for certified, professional expertise.

Disclaimer

References

IRS: Exempt organization public disclosure and availabilty requirements (2016)

Harbor Compliance: Fundraising compliance guide

Harbor Compliance: Fundraising compliance infographic

Perlman and Perlman: Nonprofit fundraising registration and compliance

Perlman and Perlman: Model disclosure statement for charities

National Association of State Charity Officials: National resources

References

Author

Baltimore-based writer and educator