As one of my clients discovered the hard way, many states have charitable solicitation registration laws. As of January 1, 2014, Nevada is one of these states. Assembly Bill 60 requires a nonprofit corporation to register with the Nevada Secretary of State before it begins soliciting or accepting tax-deductible donations within the state.
Organizations may be exempt from these registrations, if:
- They direct their requests for contributions to fewer than 15 people each year,
- Their solicitations are directed only to people related to them within the third degree of consanguinity of the officers or executive personnel of the organization, or
- The nonprofit is recognized as a church under 501(c)(3) of the Internal Revenue Code. However, even exempt organizations still have to file for an exemption. That means all nonprofits have to register something with the Nevada Secretary of State.
Regarding #1: The vast majority of nonprofits utilize social media to promote their organizations and request donations, which more than likely disqualifies you for this exemption.
About #2: The “third degree of consanguinity” under Nevada law includes parents, grandparents, nieces and nephews, aunts and uncles, and great grandparents.
For #3: To be recognized as a church by the IRS, you have to have identified your organization as such in your 1023 application for your 501(c)(3), nonprofit status.
These regulations are designed to bring more transparency to nonprofits and to protect donors. Big disasters such as Hurricane Katrina unfortunately inspire unscrupulous people to form phone nonprofit organizations and solicit donations from unsuspecting people who are just trying to help. With these state registrations, potential donors can do some recon on organizations to verify they are, in fact, properly organized nonprofits, and learn the names and phone numbers of officers.
Failure to register properly with the Nevada Secretary of State can result in penalties, including a fine of up to $1,000. (NRS 82.193). Other states may impose far higher penalties and it’s been my experience that some states are ruthless about their registrations and will at least threaten penalties of $25,000 for failure to register properly.