MISSISSIPPI CHARITABLE SOLICITATION REGISTRATION AND REGULATION Butler, Snow, O Mara, Stevens & Cannada, PLLC Leslie Scott

Transcription

1 Last Updated: November 2012 MISSISSIPPI CHARITABLE SOLICITATION REGISTRATION AND REGULATION Butler, Snow, O Mara, Stevens & Cannada, PLLC Leslie Scott Table of Contents 1. Overview 2. Mississippi Charitable Solicitation Laws 3. Resources 1. Overview To protect residents, legitimate charitable organizations and the charitable community, most states have laws requiring certain charitable organizations that solicit contributions from the public, including those in the social sector, to register and file periodic financial reports with a regulatory agency. 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 solicitation 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 Mississippi, bona fide duly constituted religious institutions and groups forming an integral part of religious institutions are excluded from the definition of charitable organization and are not required to register so long as certain conditions are met. If a charitable organization is required to register, the information that must be submitted in or attached to the state registration form 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 Mississippi, a Unified Registration Statement (URS) is accepted for registration, along with a filing fee and certain corporate and financial information. The registration is confirmed by the State s issuance of a Certificate of Registration which expires one year from its date of issuance. 1

2 In addition to registration, the states that regulate charitable solicitation generally require covered organizations to file periodic financial reports. In Pennsylvania, for example, 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. Mississippi adheres to similar requirements tied to the amount of contributions received. To determine specific registration and filing requirements, social sector charitable organizations that are engaged in or about to engage in charitable solicitation 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; however, in Mississippi, the law allows a superior or parent organization s registration to serve as sufficient registration of all of that entity s local, county or area divisions. If this method of registration for local branches, affiliates or chapters of a superior/parent organization is utilized, then the superior/parent must also file the annual financial report on behalf of the local entities in addition to filing its own report. In such event, Miss. Code Ann s financial/accounting information must be set forth separately for each local entity that raises or expends more than $25,000 and may not be consolidated with the financial report of the superior/parent organization. Many states, including some that do not require charities to register and report, regulate fundraising activity by professional solicitors and fundraising counsel. Mississippi is one of those states. Reference to the Mississippi statutes (Miss. Code Ann , ) at provide information regarding this area of regulation. 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 2

3 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 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. In Mississippi, the documents required to be submitted along with the URS are listed in Miss. Code Ann and Article of the Secretary of State s regulations found at 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. 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. Mississippi regulatory authorities are guided by the Charleston Principles and suggest they be adhered to by Internet solicitors. 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. 3

4 c. Prohibited Conduct Most states, including Mississippi, 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 or local prosecutors to prosecute violations and courts may impose monetary fines and in some cases criminal penalties. 2. Mississippi Charitable Solicitation Laws a. General The Mississippi Regulation of Charitable Solicitations Act, Miss. Code Ann , et seq., regulates charitable solicitation in Mississippi. Unless exempted from registration under the statute, a charitable organization must register annually with the Mississippi Secretary of State s office, and file annual financial reports to be allowed to solicit charitable contributions in the state. b. Exclusions In Mississippi, certain organizations are excluded from the law s definition of charitable organization and, therefore, from regulation under the Regulation of Charitable Solicitations Act. According to Mississippi law, charitable organization does not include any bona fide duly constituted religious institutions and such separate groups or corporations which form an integral part of religious institutions, provided that: Such religious institutions, groups or corporations are tax exempt pursuant to the Internal Revenue Code; No part of their net income inures to the direct benefit of any individual; and Their conduct is primarily supported by government grants or contracts, funds solicited from their own membership, congregations or previous donors, and fees charged for services rendered. c. Exemptions The law in Mississippi exempts certain charitable organizations which solicit in the State from its registration and reporting requirements. The exemption applies to the following charitable organizations: 4

5 All educational institutions that are recognized by the State Board of Education or that are accredited by a regional accrediting association or by an organization affiliated with the National Commission on Accrediting, any foundation having an established identity with any of the aforementioned educational institutions, any other educational institution which makes the solicitation of contributions solely by its student body, alumni, faculty and trustees and their families or a library established under the laws of this state. Fraternal, patriotic, social, educational, alumni organizations and historical societies when solicitation of contributions is made solely by their membership; however, posts of the American Legion and posts of the Veterans of Foreign Wars of the United States may utilize nonmembers to assist designated supervisors in the conduct of bingo under the Charitable Bingo Law and qualify for this exemption. This exemption shall be extended to any subsidiary of a parent or superior organization if such solicitation is made solely by the membership of the subsidiary, parent or superior organization. Persons requesting any contributions for the relief or benefit of any individual, specified by name at the time of the solicitation, if the contributions collected are turned over to the named beneficiary, first deducting reasonable expenses for costs of banquets or social gatherings, if any, provided all fundraising functions are carried on by persons who are unpaid, directly or indirectly, for such services. Any charitable organization which does not intend to solicit and receive and does not actually receive contributions in excess of Twenty-five Thousand Dollars ($25,000.00) during any twelve-month period ending June 30 of any year or on such other date as prescribed by rule, provided all of its fundraising functions are carried on by persons who are unpaid for such services. However, if the gross contributions received by such charitable organization during any twelve-month period ending June 30 of any year or other date as prescribed by rule shall be in excess of Twenty-five Thousand Dollars ($25,000.00) it shall, within thirty (30) days after the date it shall have received total contributions in excess of Twenty-five Thousand Dollars ($25,000.00), register with and report to the Secretary of State as required by this chapter. Any charitable organization receiving an allocation from an incorporated community chest or united fund, provided such chest or fund is complying with the provisions of Sections through relating to registration and filing of annual reports with the Secretary of State, and provided such organization does not actually receive, in addition to such allocation, contributions in excess of Twenty-five Thousand Dollars ($25,000.00) during any twelve-month period ending June 30 of any year or such other date as prescribed by rule, and provided 5

6 further, that all the fundraising functions of such organization are carried on by persons who are unpaid for such services. However, if the gross contributions other than such allocation received by such charitable organization during any twelvemonth period ending June 30 of any year or on such other date as prescribed by rule shall be in excess of Twenty-five Thousand Dollars ($25,000.00), it shall, within thirty (30) days after the date it shall have received such contributions in excess of Twenty-five Thousand Dollars ($25,000.00), register with and report to the Secretary of State as required by this chapter. All volunteer fire departments or rescue units, rural or otherwise, chartered under the laws and statutes of the State of Mississippi as nonprofit corporations. Any humane society organized under the laws of Mississippi which contracts with counties or municipalities for the care and keeping of estrays. Any other organization which the Secretary of State by rule or order exempts from the registration requirements of this chapter upon finding that (i) such registration is neither necessary in the public interest nor for the protection of contributors, or (ii) such exemption shall further the objectives of compatibility with uniformity among the states. Prior to soliciting contributions, any charitable organization that believes it is exempt from registration under the above provision must file a Notice of Exemption on a form provided by the Secretary of State. d. Initial Registration Requirements The Mississippi Secretary of State s office accepts registrations only on the URS form. The following documents must be attached to the URS registration application: With initial registrations only, a copy of the organization s current articles of incorporation (or comparable document for other types of entities) With initial registrations only, a copy of bylaws (or comparable document for other types of entities, if any) With initial registrations only, a copy of IRS Determination Letter Latest IRS tax return Form 990 and an audited financial statement if professional fundraisers are employed or other fundraising activities are compensated or the charity received in excess of $500,000 in contributions in the most recent fiscal year (other financial reporting required for charities receiving less than $500,000 in most recent fiscal year see E. below). 6

7 $50 filing fee e. Annual Reporting Requirements Mississippi law requires all registered charitable organizations that receive in any fiscal year contributions in excess of $500,000, and which do not pay for fundraising activities, as well as all registered organizations which do pay for fundraising services, to file a financial statement accompanied by a certified public accountant s opinion that the financial statement fairly represents the financial operations of the organization in sufficient detail to permit public evaluation of its operations. Mississippi law requires those registered organizations which receive in any fiscal year contributions of at least $250,000 but not more than $500,000 and that have only unpaid fundraisers to file a financial statement reviewed by an independent certified public accountant. Registered organizations that receive in any fiscal year contributions not in excess of $250,000 and which do not use paid fundraisers are required by law to file only a financial report covering the most recently completed fiscal year which contains gross receipts from contributions and specifies the use of the proceeds of such contributions. Registered charitable organizations receiving more than $25,000 but less than $500,000 must, at the Secretary of State s request, submit additional financial information including audited financial statements accompanied by an opinion letter of an independent certified public accountant. The financial information required to be filed for each type of charitable organization must be filed as a part of the initial registration (URS), any annual renewal or final report upon non-renewal of registration. f. Filing Fees Filing fees must be submitted with the initial and annual renewal registrations or the registrations will not be considered complete. The registration/renewal filing fee is $50. g. What Constitutes Solicitation The Mississippi Regulation of Charitable Solicitations Act defines the term solicitation as follows: "Solicitation" or "solicit" means the request, directly or indirectly, for money, credit, property, financial assistance, or any other thing of value on the plea or representation that such money, credit, property, financial assistance, or any other thing of value or a portion of it will be used for a charitable purpose or will benefit a charitable organization. 7

8 "Solicitation" or "solicit" includes, but is not limited to, the following methods of requesting or securing money, credit, property, financial assistance or any other thing of value: Any oral or written request. The making of any announcement in the press, over the radio or television, by telephone, through the mail or any other media concerning an appeal or campaign by or for any charitable organization or purpose. The distribution, circulation, posting or publishing of any handbill, written advertisement or other publication which directly or by implication seeks to obtain a contribution. The offer of, attempt to sell, or sale of any advertising space, book, card, tag, coupon, device, magazine, membership, merchandise, subscription, flower, ticket, candy, cookies or other tangible item in connection with which any appeal is made for any charitable organization or purpose, or where the name of any charitable organization is used or referred to in any appeal as an inducement or reason for making any sale, or where any statement is made that the whole or any part of the proceeds from the sale will be used for any charitable purpose or will benefit any charitable organization. The use or employment of container, canisters, cards, receptacles or similar devices for the collection of money or other thing of value in connection with which any appeal is made for any charitable organization or purpose. Any announcement requesting the public to attend an appeal, assemblage, athletic or competitive event, carnival, circus, concert contest, dance, entertainment, exhibition, exposition, game, lecture, meal, part, show, social gathering or other performance or event of any kind. A solicitation shall take place whether or not the person making the solicitation receives any contribution, except that a charitable organization's use of its own name in any communication shall not alone be sufficient to constitute a solicitation. Though Mississippi has not officially adopted the Charleston Principles, in determining if a Website solicitation made by an out-of-state organization rises to the level of solicitation, the Secretary of State s office will use the Charleston Principles as guidelines. 8

9 h. Enforcement It is important that charitable organizations required to register and report under Mississippi law do so, as failure to comply subjects the organizations to severe penalties. The local district attorney and the state attorney general have authority to prosecute violations. Finally, persons who knowingly and willingly violate any provision of the Mississippi Regulation of Charitable Solicitations Act shall be guilty of a misdemeanor and upon conviction are punishable by a fine not exceeding $2000 or imprisonment in jail for not more than one year or both. Anyone employing a device, scheme or artifice to defraud or engaging in acts, practices or a course of business which operates as a fraud or deceit is guilty of a felony and on conviction is punishable by a $25,000 fine or imprisonment of not more than five years or both. i. 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) Internet Filings Search for Mississippi Registered Charities, Mississippi Charities Forms and Instructions, Mississippi Charities Rules and Regulations, 9