Did you know that the IRS redesigned the Form 990 that all registered 501c(3) organizations are required to submit each year? The changes are meant to ensure more transparency for potential donors and also to help reduce the filing burden on (most) nonprofits.

One of the big changes in the new 990 is the inclusion of two questions explicitly asking you about your organization’s compliance with laws that require nonprofits to register with each state where they solicit funds. I put the word “solicit” in quotes in the title of this post because each state defines solicitation differently. For some states, the mere existence of a donations page on your website is a solicitation…even if you don’t have any current donors or prospects in that state. For other states, if you send an email to anyone in that state encouraging them to donate on your website, that is a solicitation. For other states, if you send anyone in that state an email that requests a gift (whether or not you have an online donations page), THAT is considered a solicitation. It’s not just online giving that is governed by these rules: ALL states consider a mailing to someone in that state requesting a donation a solicitation.

Each state also differs on both the steps and fees required to register to legally solicit in that state. This makes the process especially confusing. Fees can range from a flat fee of $25 or so to a sliding scale that can reach as high as $400, depending on the amount of money raised in that state each year.

There is an ongoing effort to make this process as simple as possible. The Unified Registration Statement (URS) allows nonprofits to fill out one form that can be used to register in most states. You can find this form here. Unfortunately, this universal form is not quite universal yet. Some states don’t accept the URS at this time. Other states require the URS plus additional documentation. And no states accept the URS for annual renewals – only the initial registration can be processed using the URS.

Silver Lining?

So far, I imagine this has all been bad news so far. The prospect of figuring out (and filling out) all of this new paperwork is probably feeling a bit overwhelming.

There is a very small bit of good news with this process – Exemptions! Your organization may be exempt in some states. In particular, some states have exemptions for religious institutions. For example, a quick search online finds that Pennsylvania and Maryland offer exemptions for religious organizations. Unfortunately, we can’t give legal advice about whether or not your organization is exempted from filing in these (or other states); please consult a lawyer before making any decisions. Also, these states normally still require you to file some paperwork proving that you are exempt from registering.

Who Cares?

Many of you are probably reading this thinking, “You want me to add one more time-consuming bureaucratic process to our over-worked board or staff? And I have to pay for it, too? Really?”

Unfortunately, the answer is yes. Your Organization may have legal liability for not registering to solicit funds. Even the Board members who sign the 990 may be liable for incorrectly stating that the organization is registered with each state to solicit funds based on those states’ laws. Again, please consult with a lawyer to determine your liability.

In addition, an organization could open itself up to gift challenges from an heir or a family member if it is not registered in a particular state. An organization could risk losing a pledged gift if it is challenged on these grounds.

Next Steps

OnPhilanthropy.com and eJewishPhilanthropy.com have much more detailed information about these processes. There is another commentary about these regulations on eJewishPhilanthropy.com that may be worth a read as well. I recommend you review this information and discuss with your Board on how to proceed.

They realize that you won’t be able to go out and immediately register with every state. Instead, they recommend you prioritize your filing and proceed as follows:

• Leverage the URS. This should save you lots of time.
• Determine if you are exempt from registering in any states.
• Register first in your home state.
• Register next in states where you send fundraising letters by mail (start with the states where you send to the most prospects).
• Register in states where you send email solicitations (start with the states where you send to the most prospects).
• Register in states where your website is considered a solicitation.
• Register in any other states where you are legally required to register.

Finally, you should also discuss your registration requirements and legal liability with a lawyer.

Please share with us any experiences you’ve had with this process. The 990 form revision is new, so we will all be learning on the fly. Hopefully we can make the process as simple as possible for each other.

As more and more nonprofits find Facebook to be a useful tool for enging their constituents, one question always arises: how can I get these constituents to donate? One of the first tools to consider to try to answer this question is Causes. Causes is an application that can be added to a user’s Facebook Profile or a nonprofit organization’s Facebook Page. It allows users to donate directly to the organization or simply show their support for the organization in a very visible, public way. We blogged about Causes and other online fundraising widgets in the past. But a recent post on the NTEN blog by Causes employee Susan Gordon caught our attention: she details exactly how to set up a Cause and some best practices for effectively using Causes to raise money.

Susan (who, by the way, is an alum of one of our GIJP participating camps. Is it yours? …get your Alumni databases in order!!) offers a lot of great advice and examples; I’ll focus on a few here:

• Causes’ mission is to “empower individuals to mobilize their friends for collective action, who then spread the word to their friends, and eventually create movements that span local communities and even the globe.”
• Since beginning in May of 2007, 60 Million users have used Causes.
• If a supporter has already started a cause benefiting your organization, don’t try to shut them down! Instead, get in touch with them and build a relationship. Someone who creates a Cause in your organization’s name is clearly a big fan – embrace them! The more Causes created at a grass-roots level, the farther the reach of your organization via Causes.
• Experiment! There is no sure-fire formula for a successful Cause.
• Create an active, compelling, concise title for your Cause that your constituents can rally around. Don’t just call it the name of your organization. Remember, on Facebook, users will see that their Friends have joined the Cause. It’s more powerful to see “John Doe just joined the Cause Give a Jewish child a special summer at Camp ABC” than “John Doe just joined the Cause Camp ABC Scholarship Fund.”
• When you choose a picture for your Cause, don’t just use your logo. Consider photos of individuals participating or volunteering instead.

Of course, at the end of the day, everyone wants to know: can we actually raise money for our organization using Causes? An April article in the Washington Post discussed the limited amount of money raised by most Causes so far and questioned how effective Causes can actually be. However, a rebuttal by the Association of Fundraising Professionals stressed the importance of engaging your constituents and the power of Causes (and Social Networking in general) to help raise awareness and find future prospects. And, the reality is that many organizations ARE successfully raising money via Causes. The Nature Conservancy has raised over $250,000 on Causes; another 15 nonprofits have raised over $50,000 each. And Causes in general is finding more people willing to donate via Social Networks: their daily donation totals are up by a factor of 10 over the past year.

So, what does it mean for you and your organization? First, search existing Causes to find out if anyone has already created a Cause in the name of your organization. If so, reach out to the administrator and thank them! If not, consider setting up your own Cause and posting it on your Facebook Page and your personal profile. Experiment with the name and photo associated with  your Cause. Set Goals. And then – like every other fundraising campaign and channel – evaluate your efforts and decide if it was worth it and how you might adapt to leverage this powerful tool in the future.

Have you already used Causes? Let us know what’s worked well, what hasn’t worked, and what you might do differently in the future.

Photo by d70focus

As we’ve discussed before, it’s very important that all nonprofits offer an online giving option on their website. Simply put, many donors expect to be able to give online…and some may decide not to give if there isn’t a simple donation form available to quickly donate with a credit card online.

Now that you’ve agreed that you need online giving, the next question is “How do I implement it?” I received a really good breakdown of what nonprofits should consider when deciding how they want their online donations to work in my inbox the other day. This email was from Mission Research, the maker of GiftWorks Fundraising Software (full disclosure: GiftWorks offers their own online giving module that is integrated with the base donation management software). You can find this information on their eNewsletter here.

The key decisions they discuss include:

1) Integrated or standalone? Integration with your donor management system is preferred, as the donation information is automatically entered instead of requiring manual entry of the gift data into the system. However, some donor management systems do not have this option. And this type of solution is often more expensive to implement. Integrated online giving makes the most sense when the nonprofit’s donation management system offers the functionality and the nonprofit expects to receive a large number of online donations.

2) Merchant account or aggregator? Aggregrators (like NetworkforGood or Justgive) is easier to set up and often has no (or lower) monthly fees. However, aggregators may not allow you to customize your donation page, they often have higher per transaction costs, and you don’t get the money immediately. Probably most importantly, a donor can choose to give anonymously through an aggregator, so the nonprofit may not be able to adequately thank the donor and connect with them in the future. Merchant accounts often require more effort to set up, but can offer lower per transaction fees and more customization on the donation page.

These decisions will also require considering what giving options you want to offer (recurring gifts?), how much management time is available to process online gifts, and how many online gifts you expect to receive.

Are you offering online giving? If so, how have you implemented? What have you learned from your experience? Let us know in the comments!