Do you need to register in each state for online fundraising?

There's an eternal, thorny question of online fundraising: Do you need to register in each state, in addition to your national 501(c)3 status, to legally solicit funds online?

Beth Strachan of VolunteerMatch has done a lot of research on the subject, and recently posted a very useful summary of her findings to the ProgressExchange discussion list. Her findings:

"The states' laws are not entirely clear (which always makes this fun!).

"It's not all 50 states that require registration, just 43 and the District of Columbia (so you're 10+% done already!)

"You pretty much must register in the state in which you're domiciled. The organization probably already does that as part of your 990 submission each year.

"Internet solicitations generally fit within the scope of state registration statutes since most states define "solicitation" pretty broadly -- and a handful of states (eight, I think) *have* actively pursued unregistered nonprofits that solicit online (I don't know whether these were bogus NPOs)

"The laws are especially murky regarding whether Internet-based solicitation triggers the need to solicit, but the letter of the law says that an organization should register when it is doing any kind of solicitation (major donor, direct mail, even a foundation proposal, which I found hard to believe until I recently went to apply to a community foundation that required proof of registration in the state), so unless your funding source is entirely online, you probably already need to register

"Some states make exceptions if you receive only a limited number/amount of donations from the state

"Note that registering in all states that require it is an expensive proposition -- we're talking a few thousand dollars in fees to the states plus an enormous heap of staff time (which costs you) or agency fees to file on your behalf (the registration process is very cumbersome and bureaucratic). Oh yeah, and you get to do this every year.

"Another good resource is NASCO's Charleston Principles -- not legally binding but a good framework.

"If you aren't raising tons of money and aren't targeting a specific state, this is an especially gray area. I'd take into account the spirit of the state's laws and your level of comfort with taking any risks, take a look at your full family of fundraising sources, and decide from there."

Great stuff - and many thanks to Beth for sharing. Like with any thorny fundraising decisions, you may want to consult your own lawyer before making up your mind.