NEW YORK FUNDRAISING REGISTRATION AND REGULATION Day Pitney LLP Jill A. Collins, Jennifer M. Pagnillo and Brooke Pollak

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1 Last Updated: January 2012 NEW YORK FUNDRAISING REGISTRATION AND REGULATION Day Pitney LLP Jill A. Collins, Jennifer M. Pagnillo and Brooke Pollak Table of Contents 1. Overview 2. New York 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, covered organizations are required each year to file reviewed financial statements if their

2 gross contributions exceed $25,000 per year and audited financial statements if their gross contributions exceed $300,000 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, Minnesota, Mississippi, North Carolina, North Dakota, Tennessee, Utah, Washington, West Virginia, Wisconsin and the District of Columbia. Massachusetts accepts the URS for initial registration of out of state organizations 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 The New York Attorney General s Office, which is responsible for the administration of The New York Executive Law, Article 7-A et seq., ( Article 7-A ), does not officially follow the Charleston Principles. However, in an informal conversation, the Attorney General s Office recommended that charitable organizations use the Charleston Principles as a guide when soliciting New York residents for contributions via the internet. 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

4 2. New York Charitable Solicitation Laws a. General The New York Executive Law, Article 7-A et seq., ( Article 7-A ) regulates fundraising in New York. This is closely related to the law regulating charities, the Estates, Powers and Trusts Law ( EPTL ). Since 1995, the Attorney General has had responsibility for the administration of Article 7-A in addition to its long-standing oversight of charities under EPTL. Therefore, the Attorney General administers both laws in an interconnected fashion. b. Registration Requirements The two statutes noted above each require registration of charitable and other nonprofit entities: Article 7-A: Requires registration of charitable and other nonprofit organizations that solicit contributions from New York State (including residents, foundations, corporations, government agencies and other entities). EPTL: Requires registration of both: (1) charitable organizations that are incorporated, are formed or otherwise conduct activity in New York State; and (2) trusts and estates with charitable interests. Initial registration under both Article 7-A and the EPTL is accomplished by filing a form (CHAR 410) with the New York Attorney General s Charities Bureau. The remainder of this guide will focus on the requirements for charitable and other nonprofit organizations. For more information on the requirements applicable to trusts and estates with charitable interests, see For information on the forms and instructions applicable to charitable trusts and estates, see Based on these two registration statutes, an entity is subject to one of three types of registration with the Charities Bureau: Entities registered pursuant to Article 7-A only and not registered under the EPTL. Entities registered pursuant to the EPTL only and not registered under Article 7-A. Dual: Entities registered pursuant to both Article 7-A and the EPTL

5 A charity should assume that it must register with the New York Attorney General unless it qualifies for exemption under both Article 7-A and the EPTL. For information on which charities are exempt from registration and to obtain the form to request the exemption, see The Charities Bureau will determine an organization s registration type from the information provided in the registration materials submitted by the organization. A dual registrant is only required to register once and file one annual financial report so long as it fulfills the requirements of both laws. Fundraising professionals engaged by nonprofit organizations to conduct fundraising activity in New York State may also be required to register with the Charities Bureau. In certain circumstances, financial reports must also be filed. For more information on the filing requirements for fundraising professionals, see c. When to Register Organizations should register at the earlier of the following, as applicable: (i) if registering under Article 7-A, thirty days prior to solicitation of contributions from NY, and (ii) if registering under the EPTL, within six months after receiving any property or income that is required to be applied to charitable purposes within NY. d. Annual Filing Requirements In addition to the initial registration, organizations registered under either law (or both) must annually file a form (CHAR 500) with the Charities Bureau. The requirements of the annual filing are determined based on the organization s receipts for the year, and there are additional requirements depending upon whether the organization is registered under Article 7-A, the EPTL, or both. An organization may be exempt from the annual filing for the following reasons (but must nevertheless file the form CHAR 500 to claim such exemption): Under Article 7-A, if total contributions from NY State (including residents, foundations, corporations, government agencies, etc.) did not exceed $25,000 and the organization did not engage a professional fundraiser (PFR) or fundraising counsel (FRC) to solicit contributions during the fiscal year. Under the EPTL, where gross receipts did not exceed $25,000 and total assets (fair market value) did not exceed $25,000 at any time during this fiscal year. The information required to be submitted with the applicable annual filing forms includes: - 5 -

6 Under either law: IRS Form 990, Form 990-EZ, or 990-PF with schedules, a copy of the complete IRS Form 990-T, if applicable. Under Article 7-A or for dual registrants: o Organizations with revenue from $100,001 - $249,999, must submit a copy of an independent accountant s review report and financial statements with accompanying notes prepared in accordance with generally accepted accounting principles (GAAP); o Organizations with revenue of $250,000 or above must submit a copy of an independent accountant s audit report and financial statements with accompanying notes prepared in accordance with GAAP. The annual filing fee is calculated based on the organization s gross receipts and its net worth at the end of the reporting period (depending on its type of registration). The due date of an annual filing also depends on the type of registration of the organization. Article 7-A and dual registrants must file by the fifteenth day of the fifth month after the end of the organization s accounting period. EPTL registrants must file by the last day of the sixth month after the end of the organization s accounting period. Extensions are available upon request. e. Disclosure Requirement for Solicitation Pursuant to New York Executive Law 174-b, any solicitation of contributions used by or on behalf of a charitable organization which is required to register and file annual financial reports, must include a statement that a copy of its latest annual report may be obtained, upon request, from the organization or from the New York State Attorney General s Charities Bureau, Attn: FOIL Officer, 120 Broadway, New York, New York If the charitable organization has not previously been required to file annual reports with the Charities Bureau, the solicitation must state the date when the first annual report will be filed. Note: An organization seeking to conduct a raffle or host bingo as part of its fundraising efforts should consult NY General Municipal Law, Article 9-A, and the Charities Bureau for guidance. See for more information on raffles. f. Prohibited Activities The following are several prohibited activities related to fundraising: - 6 -

7 An entity is prohibited from engaging a fundraising professional unless it receives written confirmation from such fundraising professional, signed under penalties of perjury, of compliance with Article 7-A prior to entering into a contract. An entity is prohibited from engaging in any fundraising activities unless registered and in compliance with all applicable filing requirements. Similarly, the solicitation of contributions by any entity is prohibited unless it is registered and in compliance with all applicable filing requirements. An entity is prohibited from entering into a fundraising contract unless registered and in compliance with all applicable filing and disclosure requirements. An entity is prohibited from including in any solicitation a statement that a charity s or professional fundraiser s financial report is on file with the Attorney General unless the charity or the fundraiser is in compliance with all filing requirements. An organization may not use a return mailing address located in New York state in any charitable solicitation unless (A) the charitable organization maintains and staffs an office at that address or (B) both the charity s actual address and the fact that the New York address is a mail drop is stated immediately proximate to the New York address. An entity is prohibited from falsely stating or implying that it conducts programs in New York or that its programs benefit New Yorkers. g. Penalties An organization may be subject to penalties for failure to register and file. Under Article 7-A, the Attorney General may seek civil penalties of $1,000 per violation and up to $100 per day for noncompliance with the registration requirements. The Attorney General may also revoke, suspend or deny a registration of a charitable organization, professional fundraiser, professional solicitor or fundraising counsel or deny or revoke a claim of exemption or issue an order directing a charitable organization, professional fundraiser, professional solicitor, fundraising counsel or commercial co-venturer to cease and desist specified fundraising activities. Under the EPTL, any organization that fails to comply with the registration requirements may be subject to fines in the amount of $10 per day, up to a maximum of $1,000, for each such failure. A dual registrant that fails to comply with registration requirements is subject to penalties under both laws

8 h. Closing Registration and Dissolutions The registration of a charitable or other nonprofit organization will only be closed if the organization demonstrates that it has dissolved or otherwise formally ceased operations. 3. Resources Article 7-A of the Executive Law, Solicitation and Collection of Funds for Charitable Purposes, 171-a, et. seq., available at page 2 of New York Estates, Powers and Trusts Law 8-1.4, also available at page 18 of Official Compilation of Codes, Rules & Regulations of the State of New York Title 13, 90.1, et. seq. available at page 22 of New York State Attorney General Bureau of Charities website at: 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) The Chronicle of Philanthropy, Philanthropy this Week, Episode 15: State Regulators Crack Down on Unregistered Charities -