Online Fundraising and the Law

As more and more of our readers move into the world of online solicitation of donations, especially in foreign jurisdictions, it is vitally important to receive current and knowledgeable advice from local professionals. If nothing else, it will help assure peace of mind.

With the recent changes in the Communications Law here in Israel, I’ve heard more than one organization express the thought, we’re to small for anyone to bother us. I do not recommend taking that approach with email communications and if you are accepting donations through your site – directly or through a 3rd party, that attitude could put you in legal jeopardy. The ROI on proper advice is incalculable.

The following is from from Don Kramer’s Nonprofit Issues, a one-stop place to keep current on nonprofit legal issues.

Reader question: We are a 501(c)(3) charity and would like to put a place for donations on our website. Can we receive a donation from someone in another state and use it in our home area?

Many charities have configured their websites so that they can collect contributions over the Internet and have been highly successful in obtaining contributions from other states and even other countries. It is clearly the wave of the future.

There is no law that I am aware of that prohibits you from using the gifts in your own area so long as that is what you say you will be doing. You may not solicit for one purpose and use the funds for another.

Your bigger question is whether you have to register to solicit charitable funds in each of the states that has a charitable solicitation registration law. The National Association of State Charities Officials has released its set of Charleston Principles that basically provides that you don’t have to register in other states if you have a “passive” website that merely allows a donor to find you and send a contribution over your site. But if you have an “active” site you will probably have to register. It will be considered an “active” site if you have an interactive site and specifically target people in another state or receive contributions on a repeated or ongoing basis from another state. If so, you will probably have to register in the other state. In addition, once you receive the gift from out of state, you will undoubtedly thank the donor, and ask for more. As soon as you ask for more, you are soliciting in the other state.

Rev: Dec. 9, 2008

Please note: this post should not be considered legal advice nor should it be acted upon without prior consultation with appropriate professional advisors.