IDAHO FUNDRAISING REGISTRATION AND REGULATION Hawley Troxell Ennis & Hawley LLP Justin T. Cranney

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1 Last Updated: July 2013 IDAHO FUNDRAISING REGISTRATION AND REGULATION Hawley Troxell Ennis & Hawley LLP Justin T. Cranney Table of Contents 1. Overview 2. Idaho Charitable Solicitation Laws 3. Resources 1. Overview To protect residents, legitimate charitable organizations and the charitable community, most states have laws requiring 501(c)(3) charitable organizations that solicit contributions from the public, including those in the social sector, to register and file periodic reports. The states that do not regulate these organizations are: Vermont, Indiana, Iowa, South Dakota, Nebraska, Texas (with limited exceptions), Wyoming, Montana, Idaho, and Nevada. Although specifics vary, the 40 states and the District of Columbia that regulate charitable fundraising generally require covered organizations to register with a state agency before soliciting the state s residents for contributions. Most of the state fundraising statutes exempt certain organizations from their registration and filing requirements. For example, in Pennsylvania, charitable organizations receiving annual contributions of $25,000 or less are exempt from the state registration requirements as long as they do not compensate anyone to conduct solicitations. In addition bona fide religious organizations, hospitals, educational institutions, firefighters and numerous other types of organizations are exempt from the Pennsylvania law. The information that must be submitted in or attached to the state registration forms varies from state to state. Many states accept a copy of IRS Form 990 in place of some or all of the required financial reports. In addition, other documents, such as articles of incorporation and bylaws, typically are required to be submitted. All information submitted in the registration reports is generally made available to the public. In addition to registration, the states that regulate charitable fundraising generally require covered organizations to file periodic financial reports. In Pennsylvania, for example,

2 covered organizations are required each year to file reviewed financial statements if their gross contributions exceed $25,000 per year and audited financial statements if their gross contributions exceed $100,000 per year. To determine specific registration and filing requirements, social sector charitable organizations that are engaged in or about to engage in fundraising should consult these guides, experienced counsel and the agencies in the states in which the organization expects to be doing business. Doing business in a particular state may include any of the following: (1) soliciting contributions by mail, phone or otherwise from individuals, businesses or other charities located in the state; (2) conducting mission-based programs; (3) employing individuals; (4) maintaining a checking account; or (5) owning or renting property. In some states, local governments or municipalities may also require organizations soliciting charitable contributions to register and file periodic reports. These local regulations are beyond the scope of these guides. Many states, including some that do not require charities to register and report, regulate fundraising activity by professional solicitors and fundraising counsel. These regulations are also beyond the scope of these guides. a. Unified Registration Statement The Unified Registration Statement (URS) is an alternative to filing separate registration forms in cases where covered charitable organizations are soliciting contributions in multiple states. The form is an ongoing project of the National Association of Attorneys General (NAAG) and the National Association of State Charities Officials (NASCO) in collaboration with the Multi-State Filer Project, Inc. (MFP). All states that require covered charitable organizations to register will accept the URS in lieu of their own registration form except for the states of Colorado, Florida and Oklahoma. The states that accept the URS form, however, continue to require annual filing of financial information or some other type of financial report. In addition, the following states also require the filing of supplemental forms and/or information in addition to the URS: Arkansas, California, Georgia, Maine, Mississippi, North Carolina, North Dakota, Tennessee, Utah, Washington, West Virginia, Wisconsin and the District of Columbia. Massachusetts accepts the URS for initial registration only. The URS can be downloaded by following the instructions at This website contains helpful information about registration requirements and an up-to-date list of the states that accept the URS and those that don t.

3 b. Fundraising Via the Internet and the Charleston Principles Most of the state statutes that require registration literally apply to internet solicitations that reach residents of the state. However, minimum contacts with the state and the practicality of applying these statutes to activities beyond more traditional fundraising techniques (e.g., telephone, direct mail, in-person solicitations) raise a number of issues that have troubled and perplexed state charity officials. Therefore, the National Association of Attorneys General/National Association of State Charity Officials have published the Charleston Principles that provide guidelines to states as to when internet solicitations by otherwise covered charities should be required to register. The Charleston Principles are guidelines only; they are not binding on the states and may change as laws change. Under the Charleston Principles, a charitable organization that has its principal place of business in the state (and is thus domiciled in the state) and uses the internet to solicit contributions in that state must register in that state. If the organization is not domiciled in a state, it still must register if it (1) specifically targets persons in the state or receives contributions from persons in the state on a repeated and ongoing or substantial basis through or in response to website solicitations or (2) its non-internet activities alone would require registration in the state (e.g., direct mail or telephone solicitation into the state). The foregoing is a summary only. For more information on the Charleston Principles, including a complete copy with annotations, see It is strongly recommended that social sector charitable organizations intending to solicit contributions via the internet should seek the advice of experienced counsel concerning registration under one or more of the state fundraising laws. c. Prohibited Conduct Most states have statutes that prohibit a variety of false, misleading, unfair and/or deceptive practices in connection with charitable fundraising. For example, states typically prohibit organizations from making statements that funds are being solicited for a charity or will be used for charitable purposes when such is not the case. These statutes authorize state attorneys general to prosecute violations and courts may impose monetary fines and in some cases criminal penalties. 2. Idaho Charitable Solicitation Laws a. The Idaho Charitable Solicitation Act The Idaho Charitable Solicitation Act, Idaho Code , (the Act ) governs the acts and practices of both charitable organizations and third party fundraisers. Although the Act regulates certain practices of charitable entities in Idaho, charities are

4 not required to register in the state of Idaho. As such, the Charleston Principles do not apply in Idaho. Although a charity may not be required to register under the Idaho Charitable Solicitation Act, it might still be subject to registration and reporting requirements of the Idaho Nonprofit Corporation Act or the Idaho Business Corporations Act. See Idaho template for Forms of Organization for further information regarding these requirements. i) What is a charitable organization? The Act defines charitable organization as any person determined by the Internal Revenue Service to be tax exempt pursuant to section 501(c)(3) of the Internal Revenue Code; or any person who is or who holds herself out to be established for any benevolent, educational, philanthropic, humane, scientific, patriotic, social welfare or advocacy, public health, environmental, civic, veteran or other eleemosynary purpose or for the benefit of law enforcement personnel, firefighters or other person who protects the public safety, or any person who in any manner engages in charitable solicitation. Person is defined not only as the actual charitable organization but includes any agent, assign, heir, servant, employee or representative thereof. ii) What is a charitable solicitation? A charitable solicitation is any oral or written request, directly or indirectly, for money, credit, property, financial assistance or other thing of value on the plea or representation that such money, credit, property, financial assistance or other thing of value or any portion thereof, will be used for a charitable purpose or benefit a charitable organization. In other words, any request, even indirect, for any sort of money or assistance for a charitable organization is a charitable solicitation. It is important to note, however, that a contribution does not have to be made in order for a request to be deemed a charitable solicitation. iii) What does the Act prohibit? Under the Act, it is unlawful for any person, including a charitable organization, to utilize any unfair, false, deceptive, misleading or unconscionable act or practice in planning, conducting or executing any charitable solicitation. The standards and interpretations set forth in the Idaho Consumer Protection Act, Idaho Code , apply to determine whether a particular act or practice is unfair, false, deceptive, misleading or unconscionable. With regard to religious organizations, it is unlawful to knowingly and willfully utilize any false, deceptive or misleading act or practice.

5 In addition, it is unlawful for any person or charitable organization to use a container in a public place to solicit contributions by offering a product for sale knowing the product does not have a disclosure label affixed to it. A disclosure label is a printed or typed notice, which notice must be legible and easy to read, and should be affixed to a container in a conspicuous place. Disclosure labels must inform the public of (i) the approximate annual percentage paid, if any, to any individual, person or charitable organization to maintain, service or collect the contributions raised by the solicitation; (ii) the net percentage or sum paid to the specific charitable purpose in the most recent calendar year; and (iii) whether the maintenance, service and collection from the container is performed by volunteers or paid individuals. There are some exceptions to the disclosure requirement. First, no charitable organization will be held liable if the container generates less than a gross amount of one hundred dollars ($100) per year or the charitable organization generates less than a gross amount of five hundred dollars ($500) per year from all sources for any charitable purpose or purposes. In addition, it is an absolute defense in any proceeding if the person or charitable organization has given one hundred percent (100%) of the receipts generated by the container to the designated charitable organization to further the charitable purpose for which contributions were solicited. iv) How is the Act enforced? The Act gives the attorney general the authority to bring an action to obtain a declaratory judgment that an act or practice violates the Act; to enjoin any such practice; to recover damages and restitution on behalf of consumers; to order specific performance by the violator; to recover civil penalties from a violator of up to five thousand dollars ($5,000) per violation; and to recover reasonable expenses, investigative costs and attorney fees from a violator. Additionally, a court is authorized to make such orders or judgments as may be necessary to prevent the use or employment by a person of any method, act or practice declared to be a violation; make such orders or judgments as may be necessary to compensate any consumers for actual damages sustained; revoke any license or certificate authorizing that person to engage in business in this state; and enjoin any person from engaging in business in this state. In addition, any private person who suffers damages as a result of a violation may bring any of these actions. These remedies are not exclusive, so a violator could potentially be subject to additional, independent lawsuits or other actions. b. Bingo and Raffles Laws Idaho law authorizes bingo and raffle games only when operated by qualified charitable or nonprofit organizations in the pursuit of charitable purposes. Idaho Code

6 governs charitable and nonprofit organizations use of bingo games and raffles (the Raffle Act ). i) Who is covered? The Raffle Act defines charitable organization as an organization that: 1. Has been in continuous existence in the county of operation of the charitable bingo game or raffle for at least one (1) year; 2. Conducts charitable activities; 3. Is exempt from taxation under section 501(c)(3), 501(c)(4), 501(c)(6), 501(c)(8), 501(c)(10), 501(c)(19) or 501(d) of the Internal Revenue Code; and 4. Is exempt from income taxation under title 63, Idaho Code, as a bona fide nonprofit charitable, civic, religious, fraternal, patriotic or veterans organization or as a nonprofit volunteer fire department, or as a nonprofit volunteer rescue squad, or as a nonprofit volunteer educational booster group, parent-teacher organization or association. The Raffle Act defines nonprofit organization as an organization incorporated under chapter 3, title 30, Idaho Code. ii) What qualifies as bingo games and raffles? Bingo is defined as the traditional game of chance played for a prize determined prior to the start of the game but does not include instant bingo. A raffle is defined as a game in which the prize is won by random drawing of the name or number of one (1) or more persons purchasing chances. iii) Licensing Requirements The Raffle Act requires charitable and nonprofit organizations that wish to operate bingo sessions or games or charitable raffles shall make application for a license to the state lottery. No person or charitable or nonprofit organization shall operate or conduct a bingo session or game or charitable raffle until it has received a license from the state lottery. Licensing forms can be obtained from the state lottery. Bingo games with a gross annual bingo sales of less than ten thousand dollars ($10,000) and raffles with maximum aggregate value of merchandise of less than five thousand dollars ($5,000) are exempt from the licensing requirement.

7 iv) What is prohibited? A charitable or nonprofit organization cannot sponsor or conduct more than three bingo games per week and all bingo games are limited to eight hours per day. The maximum aggregate amount of prizes for one session of bingo is set by the lottery commission. No person under the age of eighteen may participate in a bingo game where a cash prize is offered or the prize exceeds $25.00 in value for merchandise. A charitable or nonprofit organization cannot sponsor or conduct more than 12 raffles per year, excluding public or private elementary schools, secondary schools or higher education institutions located in Idaho. The maximum aggregate value of cash prizes that may be offered or paid in one raffle is $1,000. There is not a maximum aggregate value of merchandise that is used as a prize, so long as the merchandise is not redeemable for cash. All raffle drawings must be held in Idaho. No directors or officers of an organization or persons related to them either by marriage or blood within the second degree shall receive any compensation derived from the proceeds of a bingo session or raffle regulated under the provisions of the Raffle Act. v) Reporting Requirements for Bingo Games and Raffles. Any charitable or nonprofit organization conducting bingo games or raffles pursuant to the Raffle Act shall prepare a statement at the close of its license year and shall file such statement with the state lottery. Forms can be obtained from the state lottery. Every charitable or nonprofit organization whose annual gross revenues exceed two hundred thousand dollars ($200,000) from the operation of bingo games or raffle events shall provide the state lottery with a copy of an annual audit of the raffle events. The audit shall be performed by a certified public accountant who is licensed in the state of Idaho and who meets the peer review requirements set forth by the Idaho state board of accountancy. vi) How is the Raffle Act enforced? Violations of the Raffle Act are prosecuted by the county prosecuting attorney. Violations of the Raffle Act or the rules of the state lottery by charitable or nonprofit organizations, or any other person, may result in the assessment of a civil penalty of up to $10,000 per violation. Any person who knowingly holds a bingo game or raffle in violation of the Raffle Act or the rules of the state lottery may be charged under Idaho s gambling laws.

8 c. Does Idaho have other restrictions on fundraisers? Idaho also has various rules and regulations applicable to telephone solicitors (whether or not the Charitable Solicitations Act may be applicable). For example, the Idaho Consumer Protection Act provides that it is unlawful for any person to solicit a sale or order of goods or services by telephone without clearly, affirmatively, and expressly revealing certain information immediately upon contact with a prospective buyer. Such information includes the identity of the person making the solicitation, the trade-name of the person represented, and the kind of goods or services offered. These provisions appear to apply only in the event of a solicitation of an order or sale of goods, so most fundraisers would not fall under these provisions, but should be aware of the potential applicability of these additional requirements, especially if offering a good or service in exchange for a donation. 3. The Idaho Telephone Solicitation Act The Idaho Telephone Solicitation Act, Idaho Code , requires telephone solicitors to register with the attorney general at least ten (10) days prior to conducting business in Idaho. A telephone solicitor includes any person who, on his own behalf or through another person or through the use of an automated dialing-announcing device, engages in telephone solicitation. Telephone solicitation includes any unsolicited telephone call to a purchaser for the purpose of asking, inducing, inviting, requesting, or encouraging the purchaser to purchase or invest in goods or services during the course of a telephone call; or any communication, in which (i) a free gift, award, or prize is offered, or in which it is represented or implied that goods or services are offered below the regular price; and (ii) a return telephone call is invited or the communication is followed up by a call to the purchaser by the telephone solicitor; or (iii) it is intended during the course of the return or follow-up call with the purchaser that an agreement to purchase, or a purchase shall be made. Registrations are valid for one year, and may be renewed annually by applying to the attorney general and paying a registration renewal fee. In addition to the registration, a telephone solicitor must file with the attorney general an irrevocable consent appointing the attorney general as agent to receive process in any action, suit, or proceeding under this Act; provide its registration number to any purchaser who requests the number; orally inform the purchaser of his right to cancel the transaction at the time the purchase is completed; provide accurate and complete information; and give its full street address, including telephone number, of the telephone solicitor once the sale or purchase is completed. The telephone solicitor must also send a written confirmation containing a Notice of Cancellation Statement in the form provided in Section (2), Idaho Code (unless the purchaser otherwise has an unqualified right to return the goods or cancel the services for a full refund).

9 In addition, the Act makes it unlawful to (i) intimidate or torment any person of normal and reasonable sensitivities in connection with a telephone solicitation; (ii) refuse to hang up and free the purchaser s line immediately upon request; (iii) misrepresent or fail to disclose all material matters directly or indirectly relating to the goods or services; (iv) advertise, represent, or imply that the person has the approval or endorsement of any governmental office or agency; (v) advertise, represent, or imply that the person has a valid registration number if the person does not; (vi) utilize any device or method to block or mislead the intended recipient as to the identity of the solicitor or trade name of the person represented; (vii) fail to comply with the unfair solicitation provisions of the Idaho Consumer Protection Act; (viii) violate any applicable provision of the Idaho Telephone Solicitation Act; and (ix) send an unsolicited advertisement to a telephone facsimile machine. The Telephone Solicitation Act also imposes penalties and prohibits contact by solicitors of any telephone number of the Federal Do Not Call List. The attorney general has the same authority as set forth above upon violation of the Telephone Solicitation Act. In addition, a violator may be subject to a private action, along with civil fines and penalties. There are numerous exemptions from the Idaho Telephone Solicitors Act, which are codified in Section , Idaho Code. For example, a person engaging in an isolated transaction is exempt from the Act, as is a person making the solicitation solely for purposes of selling a subscription to or advertising in a newspaper or telephone directory of general circulation. Any person or entity considering making solicitations by telephone should consult these provisions. 4. Resources Annual Survey of State Laws Regulating Charitable Solicitations as of January 1, Giving USA Spotlight Issue 1, National Association of State Charity Officials, Multistate Filing, The Unified Registration Statement, Internal Revenue Service 50 State Statutory Surveys, Business Organizations, Non-Profit Organizations (Thomson Reuters/West, June 2008) Idaho Code, Title 48, Chapters 6, 10, and 12.

10 Idaho Code, Title 67, Chapter 77 About the Idaho Charitable Solicitations Act, State of Idaho, Office of the Attorney General, available at Gaming Rules of the Idaho State Lottery Commission, State of Idaho, Office of Administrative Rules Coordinator, available at Idaho State Lottery Commission, Charitable Gaming, available at The Chronicle of Philanthropy, Philanthropy this Week, Episode 15: State Regulators Crack Down on Unregistered Charities