MASSACHUSETTS FUNDRAISING REGISTRATION AND REGULATION 1 Foley Hoag LLP

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1 Last Updated: September 2013 MASSACHUSETTS FUNDRAISING REGISTRATION AND REGULATION 1 Foley Hoag LLP Table of Contents 1. Overview 2. Charitable Solicitation under Massachusetts Law 3. Resources 1. Overview To protect residents, legitimate charitable organizations and the charitable community, most states have laws requiring charitable organizations that solicit contributions from the public to register and file periodic reports. The states that do not regulate these organizations are: Delaware, Idaho, Indiana, Iowa, Montana, Nebraska, Nevada, South Dakota, Texas (with exceptions), Vermont and Wyoming. Although specifics vary, the 40 states and the District of Columbia that regulate charitable fundraising generally require covered organizations to register with a state agency before soliciting the state s residents for contributions. Most of the state fundraising statutes exempt certain organizations from their registration and filing requirements. The information that must be submitted in or attached to the state registration forms varies from state to state. Many states accept a copy of IRS Form 990 in place of some or all of the required financial reports. In addition, other documents, such as articles of incorporation and bylaws, typically are required to be submitted. All information submitted in the registration reports is generally made available to the public. In addition to the initial registration, the states that regulate charitable fundraising generally require covered organizations, if they continue to raise charitable funds or do business in the state, to file periodic financial reports. To determine specific registration and filing requirements, social sector charitable organizations that are engaged in or about to engage in fundraising should consult these 1 With contributions from the following attorneys at Foley Hoag LLP for Massachusetts laws: Gabrielle Bernstein, Roxanne Cartwright, Michelle Limaj, Sharon C. Lincoln, and Shirin Philipp. 1 Page

2 guides, experienced counsel and the agencies in the states in which the organization expects to be doing business. Doing business in a particular state may include any of the following: (1) soliciting contributions by mail, phone or otherwise from individuals, businesses or other charities located in the state; (2) conducting mission-based programs; (3) employing individuals; (4) maintaining a checking account; or (5) owning or renting property. In some states, local governments or municipalities may also require organizations soliciting charitable contributions to register and file periodic reports. These local regulations are beyond the scope of this article. Many states, including some that do not require charities to register and report, regulate fundraising activity by professional solicitors and fundraising counsel. These regulations are beyond the scope of these guides. a. Unified Registration Statement The Unified Registration Statement (URS) is an alternative to filing separate registration forms in cases where covered charitable organizations are soliciting contributions in multiple states. Thus, the URS proves most useful to nonprofits soliciting regionally or nationally and, are therefore, subject to the registration laws of multiple states. The form is an ongoing project of the National Association of Attorneys General (NAAG) and the National Association of State Charities Officials (NASCO), in collaboration with the Multi-State Filer Project, Inc. (MFP). All states that require covered charitable organizations to register will accept the URS in lieu of their own registration form except for the states of Colorado, Florida and Oklahoma. The states that accept the URS form, however, continue to require annual filing of financial information or some other type of financial report. In addition, the following states also require the filing of supplemental forms and/or information in addition to the URS: Arkansas, California, Georgia, Maine, Minnesota, Mississippi, North Carolina, North Dakota, Tennessee, Utah, Washington, West Virginia, Wisconsin and the District of Columbia. Massachusetts accepts the URS for initial registration only, and requires its own annual reporting forms for each year of operation, as described more fully below. The URS can be downloaded by following the instructions at This website contains helpful information about registration requirements and an up-todate list of the states that accept the URS and those that do not. 2 Page

3 b. Fundraising via the Internet and the Charleston Principles Most of the state statutes that require registration literally apply to internet solicitations that reach residents of the state. However, minimum contacts with the state and the practicality of applying these statutes to activities beyond more traditional fundraising techniques (e.g., telephone, direct mail, in-person solicitations) raise a number of issues that have troubled and perplexed state charity officials. Therefore, the National Association of Attorneys General/National Association of State Charity Officials have published the Charleston Principles that provide guidelines to states as to when internet solicitations by otherwise covered charities should be required to register. The Charleston Principles are guidelines only; they are not binding on the states and may change as laws change. In particular, Massachusetts has not indicated whether it intends to follow these guidelines. Under the Charleston Principles, a charitable organization that has its principal place of business in the state (and is thus domiciled in the state) and uses the internet to solicit contributions in that state must register in that state. If the organization is not domiciled in a state, it still must register if it (1) specifically targets persons in the state or receives contributions from persons in the state on a repeated and ongoing or substantial basis through or in response to website solicitations or (2) its non-internet activities alone would require registration in the state (e.g., direct mail or telephone solicitation into the state). The foregoing is a summary only. For more information on the Charleston Principles, including a complete copy with annotations, see It is strongly recommended that social sector charitable organizations intending to solicit contributions via the internet should seek the advice of experienced counsel concerning registration under one or more of the state fundraising laws. c. Prohibited Conduct Most states have statutes that prohibit a variety of false, misleading, unfair and/or deceptive practices in connection with charitable fundraising. For example, states typically prohibit organizations from making statements that funds are being solicited for a charity or will be used for charitable purposes when such is not the case. These statutes authorize state attorneys general to prosecute violations and courts may impose monetary fines and in some cases criminal penalties. 3 Page

4 2. Massachusetts Charitable Registration Laws a. General Nonprofit corporations organized under the laws of Massachusetts or qualified to do business in the Commonwealth must file an annual report with the Secretary of the Commonwealth on or before November 1st of each year. In addition, under Massachusetts law, all public charities organized in the Commonwealth or engaging in charitable work or raising funds in the Commonwealth must register with the Non-Profit Organizations/Public Charities Division of the Massachusetts Attorney General s Office (the Division ) and file annual financial reports on the Form PC along with the appropriate IRS Form 990, the correct filing fee based on annual revenue, and any required audit or review. Any entity that wishes to solicit funds in Massachusetts must also obtain a Certificate for Solicitation before engaging in fundraising activities. This is obtained by completing Schedules A-1 and A-2 as part of the Form PC filing. It is important that an entity comply with these requirements: if a nonprofit corporation fails to file its annual report for two successive years, the Secretary of the Commonwealth may revoke its charter, and if a public charity fails to file two consecutive annual financial reports, the entity may incur penalties and the Attorney General may petition for dissolution of the entity. b. Exemptions There are no exemptions for annual filings with the Secretary of the Commonwealth. However, the annual report is one page long, and can be completed online for a filing fee of $ A nonprofit corporation must also file reports with the Secretary of the Commonwealth in the event that it changes its principal office, officers or directors, or fiscal year, or undergoes certain other changes. There are two categories of charitable organizations exempted by statute from registering and filing Form PC with the Division. These are (i) religious organizations, and (ii) and certain fraternal and veteran organizations. In addition, an organization is not required to have a Certificate of Solicitation if it does not raise or receive contributions from the public in excess of $5,000 during a calendar year or does not receive contributions from more than 10 persons during a calendar year, if all functions, including fundraising activities, are performed by persons who are not paid for their services and if no part of its assets or income inures to the benefit of, or is paid to, any officers or members. However, if contributions from the public exceed $5,000, the organization must register and apply for a Certificate of Solicitation within 30 days of such occurrence. 4 Page

5 Not all nonprofit organizations are public charities. For example, fraternal groups, such as police and fire associations/unions, are generally not considered public charities and thus do not have to register and file annual reports with the Division. Note, however, that if a fundraising appeal by a police or fire group states that a charitable purpose will benefit in any way by the donations (such as a scholarship fund or assistance to the police or fire department), then the group must register and apply for a Certificate of Solicitation. c. Initial Registration with the Division Before engaging in charitable work or raising funds in Massachusetts, an organization must send initial registration materials to the Division for evaluation and determination that the organization is, in fact, a public charity. The following items are required: A copy of the organization s charter, articles of organization, agreement of association, instrument of trust, or written statement of purpose, whichever is applicable; A list of the current officers/directors and their addresses; A copy of the organization s by-laws; A copy of the IRS letter designating the organization s Section 501(c)(3) status, if the organization has received one; Initial registration fee of $100; and A Form PC (if the organization has completed its first fiscal year) or a Short Form PC along with a $50 filing fee (if the organization would like to solicit funds in the Commonwealth prior to the completion of its first fiscal year). Upon determination that the organization is a public charity, the Division assigns the organization an Attorney General s Account Number (an AG number ). Public charities not based in Massachusetts that would like to start doing business in the Commonwealth may register with the Division through the same process. d. Annual Reporting with the Division: The Form PC Within four and a half months of the end of each fiscal year, a public charity must report that year s financial data on Form PC, available at If the organization has been in existence for several years, back filings of up to four years are required. The Form PC must be accompanied by the charity s federal Form 990, 990-EZ or 990-PF (with all required IRS schedules except Form 990 Schedule B). Organizations that file a 5 Page

6 probate account with the probate court may attach to the Form PC a copy of the probate account in lieu of an IRS return. Organizations that file Form 1120 or Form 1041 with the IRS may attach that return to the Form PC. Organizations with a gross support and revenue of $5,000 or less are not required to file a federal return with their annual report to the Attorney General. The Form PC, including its attachments, becomes a public record when filed with the Division and is open to public inspection. The filing fee for the Form PC is according to a sliding scale of $35 to $2,000, depending on the charity s gross support and revenue. e. Gaming Events Massachusetts also regulates nonprofit organizations gaming events (including raffles, casino nights, Bingo, and card tournaments). These laws can be quite onerous. For example, only certain nonprofit corporations that have been operating in Massachusetts for at least two years may conduct gaming events. Such organizations include religious organizations, educational and charitable organizations, and certain other organizations operating exclusively for nonprofit purposes. In each case, the organization must (1) apply for a permit from the municipality in which the event is to be held, (2) pay a 5% tax to the Lottery Commission on the gross proceeds from the gaming event within ten days after the gaming event, and (3) report back to the municipality the amount received, the amount spent on expenses, the names of the winners, and certain other information, within 30 days after the event. Note that, in the case of a raffle, so long as no purchase is required to enter the raffle, the raffle event will not be subject to these gaming regulations; most organizations avail themselves of this practice and do not require a donation to enter a raffle event. Frequently Asked Questions regarding nonprofit gaming events can be found here: f. Charitable Solicitation i. Certificate of Solicitation Organizations that wish to raise funds in the Commonwealth must obtain a Certificate of Solicitation from the Division. If the charity has already filed with the Division in prior years, it must complete Schedules A-1 and A-2 of its next Form PC in order to apply for a Certificate of Solicitation. If the organization has not yet completed its first fiscal year, it may enclose a Short Form PC with its initial registration materials (see Subsection (c) above). As noted above, a Certificate of Solicitation is not required from a charitable organization (i) whose functions are performed entirely and exclusively by persons 6 Page

7 who are not paid for their services and (ii) whose assets or income in no part inure to the benefit of, or are paid to, any officer or member. In addition, the charitable organization must, during the calendar year, either (1) receive $5,000 or less from the public or (2) receive contributions from ten or less persons. In addition to charitable organizations, the following persons must register with the Division before soliciting donations from Massachusetts residents: professional solicitors (retained for financial or other consideration by a charitable organization to solicit contributions for charitable purposes); fundraising counsel (retained for financial or other consideration by a charitable organization to plan, conduct, manage, or advise the organization in connection with the solicitation of contributions, but who actually solicits no contributions); and commercial co-venturers (for-profit entities that conduct or sponsor a performance, event or sale to the public of a good or service which is advertised in conjunction with the name of any charitable organization or as benefitting to any extent any charitable purpose). ii. What Constitutes Solicitation Solicitation is defined very broadly under Massachusetts statute, and case law does virtually nothing to limit this definition. Solicit or solicitation is defined as any direct or indirect request for a contribution on the representation that such contribution will be used in whole or in part for a charitable purpose. The statute specifically includes any written or otherwise recorded or published request that is circulated, distributed, posted in a public place, or advertised or communicated by press, telegraph, television or other media. Solicitation of charitable contributions can be carried out by personal meetings, direct mail, , telephone calls and over the internet. The Division has released no information on its intent to follow the Charleston Principles. The use of funds by a charity, whether raised through charitable solicitations or otherwise, is beyond the scope of this outline. Charities, including social enterprises, should be aware that there are laws governing the investment and spending of funds in general and endowments in particular and the use of assets subject to gift restrictions. In Massachusetts, the Attorney General has the statutory authority to enforce the due application of charitable funds, which extends to ensuring that funds donated to charitable organizations are spent in accordance with the terms of the donation. Only the Attorney General can bring an action for misuse of charitable funds. In addition, Massachusetts has adopted the Uniform Prudent Management of Institutional Funds Act (UPMIFA). 7 Page

8 iii. Note on Massachusetts Agencies Note that the Division is a completely separate agency from the Secretary of the Commonwealth, and information a charity provides to the Secretary of the Commonwealth does not come to the Division. Although an organization may be registered as a nonprofit corporation with the Secretary of the Commonwealth and file annual reports, its status as a public charity requires separate registration and filing with the Division. iv. Division Mailing Address: Office of the Attorney General Non-Profit Organizations/Public Charities Division One Ashburton Place Boston, MA Resources Massachusetts Attorney General s Office, Division of Public Charities: Multistate Filing, The Unified Registration Statement, Internal Revenue Service, GuideStar, Charity Navigator, BBB Wisegiving Alliance, Association of Fundraising Professionals, Annual Survey of State Laws Regulating Charitable Solicitations as of January 1, 2012, Giving USA Spotlight Issue 1, American Institute of Philanthropy, 50 State Statutory Surveys, Business Organizations, Non-Profit Organizations (Thomson Reuters/West, June 2008). National Center for Charitable Statistics, National Association of State Charity Officials, 8 Page