Whether you’ve been fundraising for 2 months or 20 years, it’s important to make sure your nonprofit is handling all the legal requirements surrounding donations.
New to Fundraising?
43 states in the US currently require some sort of registration for your nonprofit to start raising money legally. So before you start asking for donations, it’s important to understand how your state handles Charitable Solicitation Registration.
If your nonprofit doesn’t have 501(c)(3) status yet, but you’d like to be able to start fundraising, learn more about fiscal sponsorship, which can help get your new charitable program off the ground. We’ve had plenty of fiscal sponsees go from fledgling projects to thriving nonprofits by using the program, including Village School of Louisville. If you’d like to apply for fiscal sponsorship through us, you can complete our 5 minute online application.
What are Nonprofits Required to Provide for Donors?
Once you’ve registered to fundraise, keep in mind that your nonprofit is legally required to send donors a donation acknowledgement letter. There are certain things that the letter should include, either in a physical letter or an email, so that your donor has the information they need when tax time comes around. The minimum amount of information required in these donation acknowledgements is certainly important. But keep in mind, many nonprofits go above and beyond by using it as an opportunity to thank the donor and give them more information about the wonderful work their gift can help your charity accomplish.
In-Kind Donations: What Counts and Are They Tax-Deductible?
One of the most common questions we get is “does XYZ count as an in-kind donation?” Whether you’re wondering if volunteering time is tax deductible or if a person paying a bill for your nonprofit counts as an in-kind donation, check out our In-Kind Donations 101 article to understand what counts and how to write a donation acknowledgement for an in-kind donation. Once you understand what constitutes an in-kind donation, you can learn more about the tax deductibility of in-kind donations.
What if a for-profit wants to help raise money for my nonprofit?
That’s great! Whether a for-profit wants to ask their customers to round up at checkout to donate to your mission or they agree to donate a portion of their proceeds, it’s important to understand the common pitfalls for nonprofits in these situations before you get started. If you want to ensure that you can raise funding without jeopardizing your tax-exempt status, reach out to us for a consultation and we’re happy to talk that through with you.
Fundraising is critical for nonprofits to grow and make an impact, so it’s important to understand how to do it right so you don’t put your tax exempt status at risk. The landscape of donating seems to be ever-changing, from donating on apps and social media, to giving via text, but the legal requirements remain. If you’d like help on more complex questions about the legalities surrounding fundraising, donation acknowledgements, or donor intent, reach out to our experienced nonprofit attorneys for a consultation.