Seems like every day in our mail we receive at least one letter from an organization asking for a contribution. What is amazing is the number of such requests that come from organizations with whom we have no prior contact. The shocking part, however, is how many of these solicitations fail to comply with the law and how many of these failures could cause a charity or a board member to incur substantial penalties.

Most states require charities to be registered with the attorney general's office or other state agency prior to making any solicitations within that state regardless of whether or not the charity is located in that state. This normally includes situations where the charity merely mails a letter, sends an e-mail or even calls a potential donor in a state where the potential donor is located. Significantly, registration of a charity is often required regardless of whether or not the charity is successful in raising any funds. In addition, the charity's registration must be renewed each year. Use of paid professional fundraisers does not relieve the charity from registering — indeed, charities must list those professional fundraisers with whom they have contractual relationships on their own registration forms, and the professional fundraisers (and often their employees) are also subject registration requirements.

The reason for requiring registration is one of public policy — to ensure that charities are using the funds they raise for charitable purposes and to ensure that solicitations are being made in a proper manner. Solicitation and registration laws are generally designed to protect citizens of a state from individuals who may attempt to obtain donations for improper purposes. In most states, the attorney general is the party who is designated to protect the citizens of the state. In keeping with that responsibility, the attorney general or other state official will seek to ensure that charities are in compliance with the law by enforcing state solicitation and registration laws.

Failing to comply with solicitation and registration laws can have grave effects on a charity, and in some cases, on members of its board. This is the case even if the charity lacked any improper motives. Penalties could include fines to the charity, revocation of the charity's registration or the complete prohibition of the charity from fundraising in the state. Depending on the state, civil or criminal penalties could even be imposed upon members of the board of directors.

In some states, like Florida, Maryland, New Jersey and New York, the rules are even more extensive, requiring every solicitation a charity sends to include certain disclosure language. Covered solicitations include letters, invitations for galas and other events, e-mails and Web sites that have donation pages. This disclosure, which is different for each state, is usually designed to inform recipients how a copy of the charity's state-filed annual report can be obtained.

Fundraising is serious business and for most charities will have a direct impact on whether the charity will be successful fulfilling its mission. If you serve on the board of an organization that does any fundraising, then you should make sure you ask about the charity's compliance with solicitation and registration laws. Some of these questions may include:

With so many wonderful charities doing crucial work for our communities, it would be a shame if that work were jeopardized because a charity lost its ability to fundraise. This is an important reminder that working with charities is complicated. The laws impacting charitable organizations vary greatly from state to state. If you are involved with a charity, or are thinking of becoming involved with a charity, make sure you seek experienced, skilled professionals to work with you and your organization. The consequences of missteps in starting or administering the organization can extend far beyond the income tax ramifications.

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