Category Archives: Penalties for Noncompliance

Fundraising Registration Penalties for Non-compliance

Non-compliance has been all over the news lately from the Donald Trump Foundation not being registered to solicit contributions to 7 West Virginia residents operating a fraudulent charity that netted them millions of dollars by using state-issued gaming licenses of two nonprofit organizations to divert money into corporate accounts.

If you’re looking to avoid the paperwork and not register your charity on the hope that your organization does not need to because you are exempt, that you do not hold any events outside your home state, or that all our money is used for mostly programs you may want to think again. You can no longer plead ignorance about state registration.  It’s in the nightly news, it’s in your inbox and even talked about in every industry seminar, webinar and podcast.

The Consequences

The civil penalties associated with failure to register typically mean fines for the organization itself. They can often be fairly substantial taking quite a bite out of your group’s yearly revenue. Often, as in the State of Maryland, fines of $5,000 or more can be imposed for every single violation, so each time your group held an event and you weren’t registered, you may be adding to your tally.   If a court determines that your nonprofit failed to register, it can order that it make restitution thus forcing you to return the donations received while in default.

The fines aren’t the only problem with a failure to register. If you knowingly fail to comply with the state’s charitable registration act, you could be facing up to felony charges just for failing to comply. This can extend to anyone on the directorial board who knew registration was required, and could mean extensive personal fines or even jail time for you and your board members. Not to mention the loss of credibility with the public as some states publish a list of offenders, so your organization could end up in the news defending itself against the claims of non-compliance.

The penalties for filing inaccurate IRS forms against your nonprofit can be to $20 per day up to the lesser of $10,000 or 5% of your annual gross receipts, penalties against the individual responding to any informational deficit request from the IRS in time can be up to $10 per day up to a maximum of $5,000, and possible loss of tax exemption.

Some Examples

A sampling of several state websites on the issue of non-compliance found that  South Carolina states in their FAQ’s section, “If a charitable organization solicits contributions without being registered, submits false information to the Secretary of State, is delinquent in a filing or violates any other provision of the “Solicitation of Charitable Funds Act,” the Secretary of State may assess an administrative fine of up to $2,000 for each separate violation. It is extremely important that charitable organizations submit all forms and documents in a timely manner to avoid the assessment of administrative fines.”

Other states like Illinois conclude that your organization has been soliciting in their state the entire time your organization has been in business and will assess late fees for up to three years and require the submission of the missed annual reports to your existing charity.  They will impose a $200 late registration fee and will require the annual filing for those years which they assumed you missed which results in a $100 late fee for each of those three years.  The consequence can be up to $500 in late annual report fees and the late registration fee. 225ILCS 460/2 h.

Minnesota states that failure to comply may be a violation of Minnesota law and as such can result in “civil penalties, attorney’s fees, [and] costs.”  Failure to file annual reports puts an organization in default in Minnesota so that they cannot solicit again until they are up to date on all filings, have paid a $50 fee, and file a new registration.

In New York, there are two overlapping categories of registration — one for soliciting from New York State residents (7-A), and the other for doing business in New York State (EPTL) — that are filed on the same forms. Monetary penalties for failing to register under 7-A are $1000 per violation and up to $100 per day of noncompliance. For EPTL it is up to $10 per day with a $1,000 max. Penalties are combined for those organizations subject to both rules.

Washington State  code 19.09.271-279 penalizes non-filers after five days’ notice by publishing a press release on internet and newspapers of a notice of the charity’s unregistered status. Knowingly giving false information in your filing is punishable as a misdemeanor under RCW Title 9A Chapter 20.

The Good News

We spoke with the charity offices of 11 states that require state registration to find out their approach to noncompliance. All said that they do not generally issue penalties for initial registrations in order to encourage compliance but added that the charity should show good faith and send in the registration form with all attachments as soon as possible. Note, this generosity is reserved for charities that register proactively. A charity that the state discovers is not in compliance is likely to receive penalties.

Once registering, the charity should also make sure that the application package is complete, signed and accurate. In a case where there has been solicitation prior to registration, a couple of the states require filing up to 3-4 years of registration forms and fees to cover the solicitation period.

As you might expect, the states could not absolutely rule out penalties, which would be incurred for extenuating circumstances, such as other compliance issues. Organizations with larger revenues and/or long-term solicitation may receive some more scrutiny, so applications should be triple checked for completion and accuracy.

Let’s Review

As you can tell, there is a difference in what we found on the state websites and in their solicitation regulations and when we spoke with them.  The regulations are in place for the serious of offenders but the states really just would like the nonprofits to comply voluntarily.

Regardless of penalties, you should file where required. Penalties grow steeper for willful violations of the law. Also, when you file, your information must be accurate. The biggest penalties are reserved for those who knowingly file incorrect or incomplete information because accurate information protects states and their residents from fraud. The bottom line is that charities need to know what the state registration requirements are, how they apply to their organization, and how to follow them.

Your Resources

No charity ever feels like they have enough resources but it is not worth the risk of losing your reputation or the possibly of your board being fined over the cost of not registering.  No one wants to go to that meeting.  There are many resources out there that can help you register depending on your budget.

If you get the right person on the phone with the states, they will help you through the process but that is a long and arduous task.  You will need to fill out the application or registration for each state separately and supply each with various attachments. You will also have to look up each state’s requirements one by one as each state requires a little something different.

Hiring a professional to perform the task for you is expensive and you still have to gather all the information and review all the paperwork for each state that you are registering in, so why not save the money.  Ultimately, you are still responsible for those state registrations.

Our Solution

Use our affordable form-fill software that will help you through the process of registration and renewal easily and affordably.  We have the most up to date forms, attachments and instructions available in one place with an added benefit of saving the information from year to year making renewal or expansion easier.  You are able to add additional states as needed if you want to hold an event in a new state or expand your programs somewhere new.

This can be done in a few simple steps:

  1. The compliance wizard will help you determine where you need to register or renew
  2. Answer the basic information and state specific questions
  3. Print the completed forms and attachments, sign and send

Please contact us with any comments, questions or concerns at (800) 780-6027 or support@SimpleCharityRegstration.com.

Non-profit Solicitation Registration and Renewal – Penalties

Welcome to SimpleCharityRegitration.com. A common question that our customers ask about state charitable solicitation registration is “What are the penalties for noncompliance?”

States have created charitable solicitation registration in order to provide their residents transparent information about the charities that solicit within their state. They take these rules seriously and expect compliance usually prior to solicitation or within 30 days of the start of solicitation. We picked 4 states for which we could find clear information about penalties to illustrate the types of penalties that exist. Generally, the penalties are steep fines with additional possible consequences for the organization.

Minnesota states that failure to comply may be a violation of Minnesota law and as such can result in “civil penalties, attorney’s fees, [and] costs.” Failure to file annual reports puts an organization in default in Minnesota so that they cannot solicit again until they are up to date on all filings, have paid a $50 fee, and file a new registration.

In New York, there are two overlapping categories of registration — one for soliciting from New York State residents (7-A), and the other for doing business in New York State (EPTL) — that are filed on the same forms. Monetary penalties for failing to register under 7-A are $1000 per violation and up to $100 per day of noncompliance. For EPTL it is up to $10 per day with a $1,000 max. Penalties are combined for those organizations subject to both rules.

Washington State code penalizes non-filers after five days’ notice by publishing a press release on internet and newspapers of a notice of the charity’s unregistered status. Knowingly giving false information in your filing is punishable as a misdemeanor under RCW Title 9A Chapter 20. In Pennsylvania, the registration instructions specify that registration is due within 30 days of the start of solicitation. Late fees are $25 per month or part of month and cannot be waived.

One issue that comes up is whether you are calling attention to your organization if you begin to register when you have not in the past and should have. Bear in mind that these are state regulations and that they carry that weight. Compliance is critical. States want you to comply. Pennsylvania adds in their description of late fees that “organizations electing to voluntarily register are not subject to late fees.” Regardless of penalties, you should file where required.

Penalties grow steeper for willful violations of the law. Also, when you file, your information must be accurate. The biggest penalties are reserved for those who knowingly file incorrect or incomplete information because accurate information protects states and their residents from fraud. The bottom line is that charities need to know what the state registration requirements are, how they apply to their organization, and how to follow them. There are consequences for not doing so.

Please note, this information is not intended as legal advice. We recommend you consult your nonprofit’s legal adviser if you have questions on how fundraising regulations affect your nonprofit.

Please contact us with any comments, questions or concerns on our support line or email us.

Please contact us with any comments, questions or concerns at (800)780-6027 or support@SimpleCharityRegstration.com.

 

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The Risks of Not Registering Your Non-profit

If you’re one of the many nonprofits preparing to raise funds in the upcoming year, you may already be familiar with the requirement to register in each state where you plan to raise funds. Because many are now using tools like social media to raise funds, the requirement to register in the states that require it is almost a foregone conclusion. If you’re looking to avoid the paperwork hassle, though, and not register your charity on the hope you qualify for some hidden exclusion, you may want to think again. The consequences associated with your actions are more serious than you think.

Civil Penalties

The civil penalties associated with failure to register typically mean fines for the organization itself. They can often be fairly substantial, too, taking quite a bite out of your group’s yearly revenue. Often, as in the State of Maryland, fines of $5,000 or more can be imposed for every single violation, so each time your group held an event and you weren’t registered, you may be adding to your tally.

Criminal Liabilities

The fines aren’t the only problem with a failure to register. If you knowingly fail to comply with the state’s charitable registration act, you could be facing up to felony charges just for failing to comply. This can extend to anyone on the directorial board who knew registration was required, and could mean extensive personal fines or even jail time (for multiple offenses in the State of Florida) for you and your board members.

Go The Easy Way

Fortunately, we make registration easier than ever, so there’s no problem with compliance. With a streamlined process that means one simple form ensures you’re complying with every state in which you plan to raise funds, and links to all the relevant information, it’s simple to get the paperwork you need completed immediately and never have to worry about facing penalties again. Get started now.

Please contact us with any comments, questions or concerns at (800)780-6027 or support@SimpleCharityRegistration.com.

More of our tutorials can also be seen on our YouTube channel: http://bit.ly/2a1t5YJ 

3 Things You Can Do To Prevent Legal Problems For Your Charity Now

You founded your organization with the best possible intentions in mind. You know the money you raise will be going to a very worthy cause that needs your help. Unfortunately, even in the world of charities, there are potential legal problems around almost every corner. How can you prevent the hassle of legal problems as well as the potential consequences involved? These tips can help.

  1. Do Your Research: Before you start any activities as an organization, whether they’re fundraising, naming directors to your board, or even gathering volunteers, do a bit of research. State laws vary on what’s required by charity organizations, as do IRS regulations, and the more you know about what might be required of you at the outset, the better off you’ll be.
  2. Consult an Attorney: Finding the right attorney to help you found your group is a wonderful idea, as it can help to head-off any legal problems before they become an issue. Choose someone who is well versed in the laws governing nonprofits to get the most bang for your buck.
  3. Register: Most charities are required to register as a nonprofit corporation and for conducting charitable solicitation in any state where they solicit donations, and in this day and age, that can mean anything from holding an event where you ask for donations to sending out a tweet that asks for donations. Because so many groups take to social media so freely today, registering in more than one state where you expect to get donations is frequently required. We can help. With our simple three-step process, you could be registered and ready to start collecting donations quicker than you expected. When the next fundraising opportunity comes up, you’ll be ready to go. Get started now.

I Never Registered Our Charitable Organization! What Do I Do Now?

Many nonprofits know that registration before you start fundraising activities is a must. Unfortunately, there are some who aren’t familiar with that requirement. As a result, there are groups out there that remain non-compliant with some state requirements for registration. If you’re one of the many that fall under that category, you’re treading in dangerous waters right now. In a world where a simple tweet can be classified as solicitation of funds, failing to register your organization could mean serious penalties.

Can I Just Stay Unregistered?

Even if you’re not sure you’re required to register, doing some research here is a must. Remaining unregistered means risking heavy fines for every single instance where you raised funds but remained unregistered. Those fines can be thousands of dollars each, so if you hold several events throughout the year, it could get very costly to your organization very quickly. Some states even provide criminal penalties for the brass of those groups that fail to register when they know it’s required.

In short, no, staying unregistered is not a good idea.

Register Now

Almost any state will tell you that even if you failed to register before, registering late is far better than never registering. To be clear, you may still face some small fines and penalties, but finding compliance now will mean you’re making a good faith effort to follow the guidelines laid out in each state. We even make that process easier than ever. With a bit of information and a few clicks, we can have your registration paperwork submitted for all applicable states in less time than you ever thought possible, and our free trial will help you find the information you need to determine if and where you need to file. Get started today to prevent problems down the road.