CONNECTICUT STATE FUNDRAISING REGISTRATION AND REGULATION Steptoe & Johnson LLP (Overview) David Roll

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1 Last Updated: August 2013 CONNECTICUT STATE FUNDRAISING REGISTRATION AND REGULATION Steptoe & Johnson LLP (Overview) David Roll Murtha Cullina LLP (Connecticut) Kenneth L. Levine Table of Contents 1. Overview 2. Connecticut Charitable Solicitation Laws 3. Resources 1. Overview To protect residents, legitimate charitable organizations and the charitable community, most states have laws requiring 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.

2 In addition to registration, the states that regulate charitable fundraising 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. 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 except to the extent they implement Connecticut solicitation laws and relate to charitable organizations that solicit in Connecticut. 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. Thus, the URS proves most useful to nonprofits soliciting regionally or nationally and, therefore, subject to the registration laws of 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, Minnesota, Mississippi, Missouri, North Carolina, North Dakota, Tennessee, Utah, Washington, West Virginia, 2

3 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. 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. Connecticut routinely uses the Charleston principles in-house, but has not officially adopted a statute regarding the Charleston principles. 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 3

4 statutes authorize state attorneys general to prosecute violations and courts may impose monetary fines and in some cases criminal penalties. 2. Connecticut Charitable Solicitation Laws a. General The Solicitation of Charitable Funds Act, Conn. Gen. Stat. 21a-175 et seq., which may be found at regulates fundraising in Connecticut. Unless exempted from registration under the statute, a charitable organization must register with the Public Charities Unit of the Connecticut Department of Consumer Protection (DCP) and file annual reports to be allowed to solicit charitable contributions in the state. b. Exemptions The following charitable organizations may claim an exemption from the registration and financial reporting requirements and substantiate the basis for the exemption by filing Form CPC-54, which may be found at with the Public Charities Unit of the DCP (there is no filing fee): Any duly organized religious corporation, institution or society; Any parent-teacher association or educational institution, the curricula of which in whole or in part are registered or approved by any state or the United States either directly or by acceptance of accreditation by an accrediting body; Any nonprofit hospital licensed under the laws of Connecticut or any similar provision of the laws of any other state; Any governmental unit or instrumentality of any state or the United States; Any person who solicits solely for the benefit of organizations described above; and Any charitable organization which receives less than fifty thousand dollars in contributions annually during any two out of the charitable organization s most recently completed three fiscal years, provided such organization does not compensate any person primarily to conduct solicitations. If the circumstances of the organization change and the exemption no longer applies, the organization must register at that time. c. Initial Registration Requirements Every charitable organization not exempted from registration must initially register with the Department of Consumer Protection prior to conducting any solicitation in Connecticut or having any solicitation in Connecticut done on its behalf by others. The 4

5 registration application form is available at When completed and signed by two authorized representatives of the organization, it must be mailed to: Public Charities Department of Consumer Protection 165 Capitol Avenue Hartford, CT The application for registration must include: A registration fee in the amount of fifty dollars; A registration statement (signed by two authorized officers of the charitable organization who certify that the statement is true); An annual financial report (Internal Revenue Service (IRS) Form 990, 990EZ or 990 PF) for the organization s most recently completed fiscal year; but (i) the organization may attach the prior year IRS form if its most recently completed year end IRS form is not complete and the prior year IRS form does not have a year end that is more than 23 months old, and (ii) if the organization has not yet completed its first fiscal year, no IRS form is required; In the event that the organization s gross revenue was in excess of $500,000 in the year covered by the applicable IRS form (excluding grants or fees from government agencies or the revenue derived from funds held in trust for the benefit of the organization), an audit opinion of a certified public accountant. If the organization fails to register properly or if the organization let the registration expire, the organization must include a financial report (IRS form and audit if required) for each such year in which the organization solicited in Connecticut but was not registered. A completed IRS Form 990, Form 990-EZ, or Form 990-PF, whichever is appropriate for the organization, with all applicable attachments, prepared according to IRS instructions, must be attached to the registration statement. All organizations are required to complete all parts, lines, columns and schedules of the IRS Forms; however if a Schedule of Contributors is required to be attached to the Form 990 or Form 990EZ that is filed with the IRS, this Schedule should be included with the Form 990 or Form 990EZ that the organization files with the State of Connecticut, but the names and addresses of donors should be redacted. Although the IRS does not make the Schedule available for public inspection, it will be a public record under State law and the names and addresses of donors will be made public unless they are redacted. Labor organizations may not file a United States Department of Labor Form LM-2 or LM-3 as a substitute for any part of Form 990 or Form 990EZ. 5

6 d. Annual Registration Requirements Every charitable organization not exempted from registration that will continue to conduct any solicitation in Connecticut or have any solicitation in Connecticut done on its behalf by others must renew its registration no later than five months after the end of the organization s fiscal year. Already-registered organizations receive a renewal registration application by mail from the DCP. If the form is not received, a new copy can be requested by ing [email protected]. For good cause the Commissioner of DCP can issue a six-month extension of the current registration if requested by ([email protected]) before the expiration date. For example, December yearends must request an extension before May 31. Only one extension is available. The requirements set forth above with respect to initial registrations also apply to renewal registrations. e. Unified Registration Statement Connecticut will accept the URS in lieu of its own registration. However, Connecticut continues to require the annual filing of the IRS Form 990, 990EZ or 990 PF, and if gross revenue exceeds the $500,000 limit as described above, an audit opinion will still be required. f. Filing Fees The initial filing fee for charitable organization registration is $50 and is required every year. If the charitable organization files a late registration, it will be subject to a $25/month late fee for each month or part thereof in which its registration is late. For good cause the Commissioner of DCP can grant an extension of time of up to 6 months to file the annual financial report. g. Person Defined Person means an individual, corporation, limited liability company, association, partnership, trust, foundation or any other entity however styled. h. Charitable Organizations Defined A charitable organization means any person who is or holds himself out to be established for any benevolent, educational, philanthropic, humane, scientific, patriotic, social welfare or advocacy, public health, environmental conservation, civic or eleemosynary purpose, or for the benefit of law enforcement officers, firefighters or other persons who protect the public safety. 6

7 i. Solicitation Defined Solicit and solicitation mean any request directly or indirectly for money, credit, property, financial assistance or other thing of any kind or value on the plea or representation that it is to be used for a charitable purpose or benefit a charitable organization, including but not limited to any oral or written request; any announcement to the press, over the radio or television or by telephone concerning an appeal by or for any charitable organization or purpose; the distribution, circulation, posting or publishing of any handbill, written advertisement, or other publication; and the sale of, offer or attempt to sell, any advertisement, advertising space, book, card, tag, coupon, device, magazine, membership, merchandise, subscription, flower, ticket, candy, cookies or other tangible item in connection with an appeal made for any charitable organization or purpose, or where the name of any charitable organization is used or referred to in any such appeal as an inducement or reason for making any such sale, or when or where in connection with any such sale, any statement is made that the whole or any part of the proceeds from any such sale is to be used for any charitable purpose or to benefit any charitable organization. Solicitations are deemed to have taken place whether or not any contribution is actually received. j. Contribution Defined Contribution means any grant, promise or pledge of money, credit, property, financial assistance or other thing of any kind or value in response to a solicitation. It does not include bona fide fees, dues, or assessments paid by members, provided membership is not conferred solely as consideration for making a contribution in response to a solicitation. k. Charitable Purpose Defined Charitable Purpose means any benevolent, educational, philanthropic, humane, scientific, patriotic, social welfare or advocacy, public health, environmental conservation, civic or eleemosynary objective. l. Paid Solicitors, Fund-Raising Counsel, and Commercial Co-Venturers In addition to regulating charitable organizations, the Connecticut Solicitation of Charitable Funds Act regulates individuals who act on behalf of these organizations, such as paid solicitors, fund-raising counsel, and commercial co-venturers. Paid Solicitors Paid solicitor means a person hired by a charitable organization to solicit contributions on its behalf. Paid solicitors are required to register by filing Form CPC-55, which may 7

8 be found at with the Public Charities Unit of the DCP. Their conduct is subject to extensive regulation. A paid solicitor is required to file with the Public Charities Unit of the DCP the contract between the paid solicitor and the charitable organization and a completed solicitation notice on Form CPC-58, which may be found at df, no less than twenty days prior to the commencement of each solicitation campaign. The charitable organization on whose behalf the paid solicitor is acting is required to certify that the solicitation notice and accompanying material are true and complete. A paid solicitor is also required to file a solicitation campaign report on Form CPC-59, which may be found at with the Public Charities Unit of the DCP no more than ninety days after a solicitation campaign has been completed, and on the anniversary of the commencement of any solicitation campaign that lasts more than one year. An authorized official of the paid solicitor and two authorized representatives of the charitable organization must certify that such report is true and complete to the best of their knowledge. Fund-raising Counsel Fund-raising counsel means a person who, for compensation, plans, manages, advises or consults with respect to the solicitation in Connecticut of contributions, but does not directly or indirectly employ, procure or engage any person compensated to solicit contributions. Fund-raising counsel who, at any time, has custody or control of contributions from a solicitation, is required to register by filing Form CPC-56, which may be found at with the Public Charities Unit of the DCP. The filing fee is $120. Fund-raising counsel s conduct is subject to extensive regulation. Commercial Co-Venturers Commercial co-venturer means a person who, for profit, is regularly and primarily engaged in trade or commerce in Connecticut other than in connection with the raising of funds for charitable organizations or purposes and who conducts a charitable sales promotion by offering to donate to the charitable organization a portion of the revenue derived from the advertised sale of a product or service. Every charitable organization that agrees to permit a charitable sales promotion to be conducted on its behalf must 8

9 obtain a written agreement from the commercial co-venturer and file a copy of the agreement with DCP not less than ten days prior to the commencement of the charitable sales promotion within Connecticut. The agreement must be signed by an authorized representative of the charitable organization and the commercial co-venturer and must include the following: the goods or services to be offered to the public; the geographic area where, and the starting and final date when, such offering is to be made; the manner in which the name of the charitable organization is to be used, including any representation to be made to the public as to the amount or per cent per unit of goods or services purchased or used that is to benefit the charitable organization; a provision for a final accounting on a per unit basis to be given by the commercial co-venturer to the charitable organization and the date when it is to be made; and the date when and the manner in which the benefit is to be conferred on the charitable organization. Fund-raising counsel who at any time have custody or control of contributions from a solicitation and all paid solicitors are required to file a bond in the amount of $20,000 with the Public Charities Unit of the DCP using Form CPC-57, which may be found at m. Prohibited Conduct in Connecticut Actions that charitable organizations and persons are prohibited from engaging in include: Any person to misrepresent the purpose or beneficiary of a solicitation; Any person to misrepresent the purpose or nature of a charitable organization; Any charitable organization or any person while engaged in the conduct of the affairs of a charitable organization to engage in any financial transaction which is not related to the accomplishment of its charitable purpose, or which jeopardizes or interferes with the ability of the charitable organization to accomplish such organization s charitable purpose; Any charitable organization to expend an unreasonable amount of money for solicitation or management; Any person to use or exploit the fact of registration so as to lead the public to believe that such registration constitutes an endorsement or approval by the State; 9

10 Any person to misrepresent that any other person sponsors or endorses a solicitation; Any person to use the name of a charitable organization, or to display any emblem, device or printed matter belonging to or associated with a charitable organization without the express written permission of the charitable organization; Any charitable organization to use the name which is the same as or confusingly similar to the name of another charitable organization unless the latter organization shall consent in writing to its use; Any charitable organization to represent itself as being associated with another charitable organization without the express written acknowledgement and endorsement of such other charitable organization; Any person to make any false or misleading statement on any document required by the Connecticut Solicitation of Charitable Funds Act; Any person to fail to comply with the requirement of the Connecticut Solicitation of Charitable Funds Act; Any charitable organization to use the services of an unregistered fund-raising counsel or paid solicitor; Any fund-raising counsel or paid solicitor to perform any services on behalf of an unregistered charitable organization; or Any person to appropriate any property of a charitable organization for private use. The Commissioner of the DCP is empowered to conduct investigations of those who have violated or been accused of violating the Connecticut Solicitation of Charitable Funds Act. The Commissioner is also empowered to deny, suspend, or revoke the registration of any charitable organization, fund-raising counsel, or paid solicitor that has violated the Act. The Attorney General, at the request of the Commissioner, may apply to the Superior Court to enjoin a charitable organization, order restitution, or order any relief as may be appropriate to ensure that the charitable funds are used correctly. If a person willfully engages in conduct prohibited by the Act, a civil penalty of up to $2,500 for each violation may be levied against the party. Any person who is found to have violated the Act knowingly may be subject to a fine of up to $5000, face not more than one year of imprisonment, or both. 3. Resources National Association of State Charity Officials, Annual Survey of State Laws Regulating Charitable Solicitations as of January 1, Giving USA Spotlight Issue I, final.pdf Multistate Filing, The Unified Registration Statement, 10

11 Internal Revenue Service: 50 State Statutory Surveys, Business Organizations, Nonprofit Organizations (Thomson Reuters/West, June 2008) The Chronicle of Philanthropy, Philanthropy This Week, Episode 15: State Regulators Crack Down on Unregistered Charities Conn. Gen. Stat. 21a-175 through 21a-194: Connecticut Regulations On Solicitation of Charitable Funds, 21a-190k-1: 190k_the_solicitation_of_charitable_funds.pdf Connecticut Charitable Registration Information and Forms (NOTE: all forms have been revised as of October 2010), 11