Law & Legal & Attorney Tax Law

Nonprofit Fundraising Laws

    Fundraising License

    • Some states require nonprofits to register their organization and obtain a fund-raising license before they can legally solicit donations. The fund-raising laws also include the nonprofit agency providing a description of the fund-raising activities they plan to use such as direct mail appeals, special events and grant proposals. Nonprofits have to keep accurate records tracking the number of donations and how much money was raised and be able to show how the money was spent. Many states require that nonprofits provide them with annual reports with the outcomes of their fund-raising efforts. As long as the nonprofit is in operation, the agency will have to renew its fund-raising license and submit any applicable fees if it wants to continue soliciting donations.

    Tax Exempt Status

    • According to federal nonprofit fund-raising laws, in order for donors to claim donations on their annual tax returns the nonprofit organizations they contribute to must have a 501(c)3 tax exempt status from the Internal Revenue Service. Many nonprofits are exempt from federal income taxation because of their organizational structure and purpose, and those that receive donations need to provide their donors with a receipt of their contributions that they can use when filing their taxes. The receipt is usually in the form of a 'thank you' letter that includes the date of the contribution, the amount and the official name of the nonprofit organization.

    Quid Pro Quo Donations

    • Many nonprofit organizations host annual events to bring together their supporters and provide entertainment while fund-raising for the cause. The Internal Revenue Service has a nonprofit fund-raising law for how charities must handle crediting donors that support these events when a portion of the donation is a quid pro quo contribution. Usually, the ticket purchase for a nonprofit event covers the cost of goods and/or services such as a meal or a seat at a concert, while the remaining amount is donated directly to the charity. For quid pro quo donations that exceed $75, the law requires that nonprofits provide donors with a statement that gives the amount of the donation that is tax deductible. This statement can either be provided on the initial solicitation to donors or in a letter acknowledging receipt of their gifts and it also must include an estimate of the value of the goods and/or services received.

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