When a 501(c)(3) charity encourages its friends and donors to share an appeal for support with their friends through a social networking medium, does this raise legal concerns?
Depending on how many friends and donors the charity may have, it sounds like a good idea for spreading the word and obtaining more contributions. But since the charity is no longer in control of the solicitations, it may trigger the need to register for charitable solicitation in all 39 states and the District of Columbia that have registration statutes if it is has not already done so.
Unless exempt or excluded, a charity is normally required to register within any of those states before directly or indirectly soliciting charitable contributions. Under the “Charleston Principles” of the National Association of State Charity Officials (NASCO) (www.nasconet.org), the Attorneys General will not usually require registration simply because a charity may receive contributions on its website, so long as it is a “passive” site and the charity does not take steps to drive traffic from out of state to the site. This kind of encouragement, since the friends and donors are asked to forward the message to friends wherever they are, could be considered active engagement and, like a direct mail solicitation, an actual solicitation in the state of the person who receives the request. Assuming that the friends and donors are not compensated for forwarding the message, they would not have to be registered.
But at the very least, if the organization receives a gift from a state in which it is not registered, it will need to determine whether it has to register before it asks for more.
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