Is it illegal for a group to claim it is a nonprofit when it has no nonprofit status?
What do you mean when you say nonprofit status? There are a lot of organizations that are nonprofit under state law, which means that can’t pay dividends to owners or members. When we talk about nonprofit status, we tend to mean tax-exempt and charitable. But there are a few nonprofits that are not tax-exempt and lots of tax-exempt nonprofits that are not charities. (See Ready Reference Page: “What Do We Mean When We Say Nonprofit?”)
A statement that an organization is a nonprofit could be accurate even if it is not a charity. It would generally be illegal under state charitable solicitation registration laws or other state laws for an organization to represent or imply that it is a charity to solicit charitable contributions when it is not recognized as a charity. An organization that claimed it was nonprofit and is not nonprofit under state law would open itself to claims of misrepresentation and fraud if a third party detrimentally relied on that representation.
April 8, 2009
Charity fundraising event planners have to worry not only about the invitation list, the menu and the program. They also have to worry about a host of legal issues that, if ignored, could turn the event into a financial and public relations disaster. This webinar will explore the top ten areas of legal concern for a charity’s annual gala dinner dance, bikathon, day in the park, or other special fundraising event. Learn more in our pre-recorded webinar.
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