November 11, 2022

As we approach Giving Tuesday and year-end giving season, nonprofits should review their fundraising practices to maximize giving and ensure legal compliance. Questions nonprofits should consider include:

1. Is your organization registered to solicit donations in all states where it is required?
   Most organizations now accept donations on their websites. This could trigger charitable solicitation laws in states where you have donors. The penalties for noncompliance with state charitable solicitation laws can be steep, so be sure you know where your donors live and what their home states require.

2. Does your organization use professional fundraisers?
   Like charitable solicitation, most states regulate the use of professional fundraisers. It’s important to know what is required before utilizing such services.

3. Does your organization collaborate with for-profits on cause-related marketing or commercial co-ventures?
   These arrangements can be very beneficial to nonprofits and their for-profit partners, but they must comply with state laws, which vary from state to state, and federal laws that prohibit private benefit and private inurement.

4. Does your organization receive qualified sponsorship payments?
   Qualified sponsorship payments are payments made to nonprofits, typically by for-profit companies, with no expectation of a substantial return benefit. Acknowledging a donation using the for-profit’s name or logo is allowed but providing any greater benefit could be considered advertising and result in the payment being treated as unrelated business income.

5. Does your organization provide receipts to donors acknowledging their contributions?
   The IRS requires organizations to acknowledge donations of $250 or more, but it is a best practice to acknowledge all donations. This can be done with each donation or at year-end with a letter acknowledging all donations made throughout the year. The letter should include the name or your organization, your EIN, the dollar amount and date of each cash contribution, a description of any noncash contribution, and a statement that the gift (all or a portion) is tax-deductible and, for any portion that is not tax-deductible, a description and the value of any goods and services provided in exchange for the donation.

6. Does your organization have a gift acceptance policy?
   It’s important to know in advance what types of gifts your organization will accept and how you will respond if you receive an unusual gift. Some gifts may not fall within your organization’s stated values (such as certain gifts of stock) and others may give rise to legal obligations that make accepting the gift impractical (such as real property and cars). Answering these questions in advance will ensure your organization is prepared in the event of such a gift.