by Alyce Lee Stansbury, CFRE
Reprinted in the Tallahassee Democrat 4-13-08
Charities can jeopardize their 501 (c)(3) tax-exempt status if they do not comply with Internal Revenue Service regulations and are not properly registered with the State of Florida prior to soliciting funds. Here are some guidelines to help ensure your organization is meeting the minimum legal requirements to fundraise:
To begin, tax-exempt organizations must comply with the Internal Revenue Service’s “Charitable Contributions Substantiation and Disclosure Requirements” (Publication #1771). www.irs.gov/pub/irs-pdf/p1771.pdf. This publication explains the federal tax law for charitable organizations that receive tax-deductible contributions. It outlines IRS requirements on recordkeeping, written acknowledgments, and written disclosures. For example, charities are required to provide a written acknowledgment of all contributions of $250 or more no later than January 31 of the year following the donation. Charitable organizations should practice good stewardship and exceed this requirement by acknowledging all donations, regardless of gift amount. A study conducted in 2003 by Cygnus Applied Research found donors want three things from the charities they support: (1) confirmation their gift was received and the organization was pleased to get it; (2) their gift was used as intended; and (3) people have benefited. By accurately acknowledging all gifts in a timely manner, charities will satisfy both the donor’s desires and the IRS requirements. The goal of any fundraising program should be to develop a donor, not just get a donation. It takes time and cultivation to build loyal, long-term donors but they are the key to a robust fundraising program that generates predictable, sustainable funding.
In addition to IRS requirements, all charities soliciting funds in Florida must comply with the Solicitation of Contributions Act, Chapter 496, Florida Statutes www.800helpfla.com. This statute requires charities, fundraising consultants, and professional solicitors to register with the Department of Agriculture and Consumer Services and renew annually. The Department collects registration fees and has authority to impose penalties for non-compliance.
Chapter 496 includes the following required disclosure that must be conspicuously displayed in capital letters on every printed solicitation, written confirmation, receipt, or reminder of a contribution that reads: “A COPY OF THE OFFICIAL REGISTRATION AND FINANCIAL INFORMATION MAY BE OBTAINED FROM THE DIVISION OF CONSUMER SERVICES BY CALLING TOLL-FREE (800) 435-7352 WITHIN THE STATE. REGISTRATION DOES NOT IMPLY ENDORSEMENT, APPROVAL, OR RECOMMENDATION BY THE STATE.” Executive Directors and fundraising staff should become familiar with this statute which includes additional required disclosures.
To help ensure your organization is meeting these requirements, consider consulting an attorney and a CPA to review your initial registration and subsequent fundraising materials. Invite them to serve on your Board as their professional expertise will be invaluable, particularly to a new organization soliciting funds for the first time.
Although this process can be overwhelming, the IRS has developed an online, interactive training program at www.stayexempt.org. Small to mid-sized tax-exempt organizations should visit this site for more information to help keep their exempt status intact.
Competition for charitable donations is intense. Properly registering with the State of Florida and complying with IRS requirements will ensure the tax-exempt status of your organization and earn the respect and trust of current and future donors.
Alyce Lee Stansbury, CFRE, President of Stansbury Consulting, is a 25 year fundraising veteran and teaches a graduate course in fundraising at Florida State. She can be reached at firstname.lastname@example.org.