TRUSTS & ESTATES (CHARITABLE SOLICIT)

Trusts & Estates (Charitable Solicitations)

New York – EPC New York Executive Law Article 7-A entitled "" govern solicitations for charitable purposes within New York State.

The New York State Department of Law (Office of the Attorney General) Charities Bureau Registration Section (Charities Bureau or NYCB) is the agency charged with registering all charitable organizations (with certain specified exemptions) operating within New York that solicit charitable contributions in New York.

All applicants must pay certain initial registration fees and there are no annual registration fees thereafter.

Registration is accomplished through accessing the online registration portal and completing the or the New York State version thereof, CHAR410

Copies of the applicant's bylaws or other internal rules, certificate of incorporation or other organizational document, Internal Revenue Service (IRS) Form 1023 or 1024 (if the applicant has already applied to the IRS for a tax exemption) and the resulting IRS determination letter must accompany the application.

All registrants must submit their annual financial reports within 135 days after their fiscal year ends (or if they report based on the calendar year, then no later than May 15th).

Most charitable organizations engaging in solicitations for charitable purposes from individuals, foundations, corporations and government agencies located within New York must register with the NYCB before they engage (either directly or through a professional fundraising organization) in any fundraising activities, and if any such charitable organization owns or controls any property (real property or otherwise) within New York, such charitable organization may also be required to register pursuant to the New York Estates, Powers & Trusts Law – EPT, unless they may qualify for one of the many allowed exemptions from registration.

In general, a charitable organization may be eligible for an exemption from registration if such charitable organization does not use professional fundraisers (such as telemarketing companies) for any activities within New York and the gross total contributions to such charitable organization (including contributions by individuals who live within New York, and grants or other financial assistance from foundations, corporations, and government agencies located within New York).

A charitable organization that may qualify for a registration exemption must file a Schedule E – Request for Registration Exemption for Charitable Organizations with the NYCB and obtain a letter from the NYCB confirming that it is indeed exempt from registration with the NYCB.

Any educational institution within New York that solicits contributions only from its own student body, alumni, faculty, trustees, and their families is exempt from registration with the NYCB.

Any educational institution or museum within New York that files annual reports with the Board of Regents of the State University of New York or a similar agency in another state is also exempt from registration with the NYCB.

All government agencies within New York and all organizations they may control within New York are exempt from registration with the NYCB.

Any historical society within New York chartered by the Board of Regents of the State University of New York is exempt from registration with the NYCB.

Individuals or organizations within New York that solicit contributions for the benefit of a single named individual are exempt from registration with the NYCB, provided all the contributions are paid directly to the single named individual for whom the contributions were intended.

All law enforcement support groups within New York are exempt from registration with the NYCB.

Libraries within New York that file annual reports with the New York Education Department are exempt from registration with the NYCB.

A membership organization (such as an alumni, fraternal, patriotic, or social organization) within New York that only solicits contributions from its own membership is exempt from registration with the NYCB.

Any parent teachers association (PTA) within New York, and any PTA affiliated with an exempt educational institution in New York, is exempt from registration with the NYCB.

All religious corporations or other organizations with religious purposes (such as religious schools, and other organizations operated, supervised, or controlled by a religious organization) within New York are exempt not only from registration with the NYCB, but are also exempt from all provisions of New York charitable solicitations laws.

Any veterans' organization within New York is exempt from registration with the NYCB.

Any volunteer ambulance service organization within New York is exempt from registration with the NYCB.

Any volunteer firefighters' organization within New York is exempt from registration with the NYCB.

The New York State Attorney General offers advice to charitable organizations which hire professional telemarketing companies to solicit contributions on behalf of such charitable organizations, such as checking with the NYCB to verify that the telemarketer has filed all the required contracts and financial statements, checking with the NYCB to verify what other charitable organizations such telemarketer may be representing simultaneous with your particular fundraiser and then obtaining copies of the telemarketer's contracts with such other charitable organizations (to verify the terms and conditions in such contracts and to verify that such telemarketer in not overcharging your charitable organization), checking with the NYCB to verify the registration status of such telemarketer and its individual employees (the telemarketer company itself must be registered and each individual who is employed such telemarketer in New York to make calls on behalf such charitable organization must be registered individually with the Attorney General as a professional solicitor), making periodic visits to any telephone room used by telemarketers, obtaining copies of the telemarketing company's invoices and receipts to verify that the telemarketer is paying its vendors on time (to get an idea of the telemarketer's financial condition), requiring the telemarketer to keep accurate records of all funds it has expended in furtherance of the fundraising campaign for which it was hired, requiring the telemarketer to provide periodic accountings of the fundraising campaign for which it was hired, requiring the telemarketer to provide references from other charitable organizations, requiring that funds solicited by the telemarketer should be received by your charitable organization itself or by a bank or other fiduciary custodian on behalf of your charitable organization rather than by the telemarketer itself, reviewing all written solicitations proposed by the telemarketer and the scripts of all verbal solicitations (to verify that all representation made about your charitable organization are accurate, that all written and verbal solicitations contain the same name of your charitable organization as it is registered with the Attorney General, that all donors are advised that they have the right to obtain copies of your charitable organization's annual financial report from the Attorney General, and notice to all potential donors that all written and verbal solicitations conducted by a professional telemarketer or any of its representatives must disclose the name of such professional telemarketer, the name of specific individual person making the individual solicitation to the potential donor and a clearly-worded statement that such professional telemarketer is being paid by your charitable organization to raise funds for your charitable organization).

New York law requires that contracts for the purpose of fundraising must contain certain provisions, such as allowing the charitable organization the right to cancel the contract with the professional telemarketer without cost, liability or penalty within 15 days after the professional telemarketer has filed such contract with the Attorney General, contact and identification information (including the addresses names, and registration numbers of both parties to the contract, as well as the dated signatures of the authorized signatories to the contract), financial terms of the contract, requiring any donations for the particular fundraising campaign that are received directly by the professional telemarketer to be deposited in a bank account controlled exclusively by the charitable organization to which such funds were donated within 5 days after receipt thereof by the professional telemarketer, and very clear descriptions of the specific services to be provided by the professional telemarketer.

Performance of typical tasks related to charitable solicitations, such as acting as outside General Counsel for charitable organizations, charitable solicitation compliance and registration, internal investigations into possible corrupt practices, procurement and use of online and software fundraising platforms, legal support for gaming fundraising (such as bingo, contests, raffles and sweepstakes), and research and reporting about internet fundraising regulations and not-for-profit mailing rates.

Negotiation and drafting agreements with commercial co-venturers, commercial telemarketers, for-profit and not-for-profit entities and preparation of all related ancillary documents, and agreements regarding administrative fines, penalties, and state consent agreements.

Consultation regarding state and federal regulations regarding registration and disclosure requirements for cause-related marketing and fundraising.

Corporate entities may also form corporate charitable foundations that receive automatic charitable donations triggered by sales of the corporate entity's merchandise (a percentage of each sale is automatically paid to the foundation by the corporate entity).

The psychology of this arrangement is that through this funding mechanism, the charitable cause becomes part of the corporate entity's positive brand identity.

The IRS issued a General Information Letter acknowledging that payments to charities can benefit a corporate entity's bottom line, and stating that a certain class of socially-conscious “benefit corporations” may treat payments to charitable organizations as a business expense rather than as a charitable donation so long as such payments bear a direct relationship to the entity's business and are made with a reasonable expectation of a reciprocal financial return.

Thus, such benefit corporations may take unlimited business expense deductions on their charitable contributions as opposed to limiting such deductions to the standard 10% cap for corporate donations to charitable organizations, and also allow employee matching grants and scholarship programs.

A corporate charitable foundation is a separate legal entity whose board members owe a fiduciary duty to act in the best interest of the foundation, and must file an annual financial report must be filed with the IRS separate from the corporate entity's annual financial report.

Corporate charitable foundations that engage in fundraising activities (perhaps either by being the beneficiary of charitable sales promotions conducted by their founding corporate entity or by soliciting customer donations), either directly or through the use of professional fundraising entities, may need to register to solicit charitable contributions in every state in which they solicit charitable donations.

There are strict self-dealing rules applied to corporate charitable foundations by the IRS and the states, due to the close connections between the founding corporate entity and such corporate charitable foundation.

There are also extensive Federal compliance requirements for corporate charitable foundations, particularly related to donations from foreign entities, due to anti-corruption and potential terrorism issues.

Cause marketing campaigns (in which the corporate entity advertises that the sale of its goods or services will result in a donation to a charitable organization or cause, or otherwise engages its customers to take actions to support a cause), can be conducted to benefit either the corporate entity's own corporate foundation or some unrelated charity.

Many corporate entities are now also publishing corporate social responsibility (CSR) reports, in an attempt to inform the public of the social improvement activities in which they engage on a regular basis.

If an individual of corporate entity wishes to act as a fundraising counsel (FRC), many states require registration.

Such an FRC generally does not actually solicit charitable donations personally, or have custody of such donations, but rather manages and plans activities related to charitable solicitations for a fixed fee or percentage of the donations received.

States may classify an individual or corporate entity as an FRC if they engage in certain activities, such as advising on how to maximize fundraising results, coaching an organization’s development staff or volunteers who are conducting peer-to-peer fundraising campaigns, designing and managing a direct mail campaign, developing a major gift or capital campaign, implementing a digital fundraising strategy, preparing fundraising materials, or managing an online fundraising platform and is paid by a charitable organization to optimize such charitable organization's fundraising efforts.

Due to the broad geographical area and numerous types of media through which the FRC may operate, an FRC may be required to register in the state of the FRC's domicile and in every state in which the FRC may conduct any activities related to charitable fundraising.

Many states now allow filings for charitable organizations to be accomplished through the online Unified Registration portal, using the Unified Registration Statement, which is a combined effort of the National Association of Attorneys General and the National Association of State Charities Officials, as part of the Standardized Reporting Project, whose aim is to simplify, standardize, and streamline compliance requirements of state laws relating to the registration of not-for-profit organizations performing charitable solicitations.

Legal analysis and review of existing philanthropic programs conducted both directly by a corporate entity and through its charitable foundation, with the goal of expanding internationally.

Consultation for the restructuring of corporate grant making programs through the development of new corporate policies, procedures and protocols for reviewing and approving potential grants and grantmaking oversight documents.

Experience with international charitable solicitations involving International grantmaking agreements, affiliations and policies relating to compliance with Federal and state laws, and the use of "friends of" organizations (generally not-for-profit corporations, classified either as a public charity or as a private foundation).

Last updated 201008_1936