When looking at a map of the United States, it is clear to see where the border of one state ends and where another begins. These lines can begin to blur when it comes to how a nonprofit organization can legally operate, fundraise, and solicit donations in states other than its home state. Being aware of the factors that may trigger a nonprofit to be required to file in other states will help your organization cross city limits and state borders within legal bounds.
Operating in Multiple States
Each nonprofit is required to file a “Certificate of Authority” if it would like to engage in activities in states other than the state where it was originally formed. A Certificate of Authority allows a nonprofit to legally hold events and conduct activities in that state. Each state has its own filing process for obtaining this certificate and this should be considered when choosing which state to operate in.
Fundraising and Soliciting Donations
Most states have registration requirements for nonprofits that want to fundraise and solicit donations in other states. However, the Foundation Group, an informational source for nonprofit organizations, states, “Forty states and the District of Colombia require 501(c)(3) organizations to register with their Department of Charities prior to soliciting donations from the public.” It may be beneficial for your nonprofit to fundraise in states that do not require registration. This could cut additional costs, enabling your organization to dedicate those resources toward reaching other valuable goals.
The internet provides accessibility to donors across the country without having to travel long distances to make contributions. Because of this, online transactions that could trigger a filing requirement for the nonprofit include soliciting donations from a specific group of people residing in a different state, and repeated or substantial donations from outside donors.
Furthering Your Mission One County Line at a Time
If your nonprofit is planning to fundraise, solicit donations, or conduct any activities in a state other than where you are currently filing, you should consult a CPA to determine if your proposed activities will result in any additional registration or reporting requirements. In doing so, you will be able to contribute to the growth of communities across the map and further your nonprofit’s mission, one county line at a time.
New Tax Law is here! Here’s what you need to know for your nonprofit organizations:
Changes to Unrelated Business Income Tax – The new law requires an organization with more than one unrelated trade or business to calculate UBIT separately for each. Losses from one trade or business cannot be used to offset income from another during a tax year, and can only offset income from that activity in a future tax year. Certain fringe benefit expenses which were disallowed as business deductions will be treated as UBIT for exempt organizations. The UBIT tax rate for non profits organized as corporations is reduced to 21%.
Net Investment Income Excise Tax – the legislation kept in place the 1% or 2% excise tax on the net investment income for private foundation. It did impose a 1.4% excise tax on net investment income of educational institutions that meet certain thresholds.
Excise Tax Imposed on Excess Executive Compensation – the legislation imposes a 21% excise tax on executive compensation over $1 million in a taxable year for certain employees. This tax is also imposed on excess parachute payments for those same employees. This change applies to virtually all exempt organizations, not just 501(c)(3) organizations.