Last Updated: August 2012

NORTH DAKOTA STATE FUNDRAISING REGISTRATION AND REGULATION Nilles, Plambeck, Selbo & Harrie Ltd. Ryan C. McCamy Table of Contents 1. Overview 2. Connecticut Charitable Solicitation Laws 3. Resources 1. Overview To protect residents, legitimate charitable organizations and the charitable community, most states have laws requiring 501(c)(3) charitable organizations that solicit contributions from the public, including those in the social sector, to register and file periodic reports. The states that do not regulate these organizations are: Vermont, Indiana, Iowa, South Dakota, Nebraska, Texas (with exceptions), Wyoming, Montana, Idaho and Nevada. Although specifics vary, the 40 states and the District of Columbia that regulate charitable fundraising generally require covered organizations to register with a state agency before soliciting the state’s residents for contributions. Most of the state fundraising statutes exempt certain organizations from their registration and filing requirements. For example, in Pennsylvania, charitable organizations receiving annual contributions of $25,000 or less are exempt from the state registration requirements as long as they do not compensate anyone to conduct solicitations. In addition bona fide religious organizations, hospitals, educational institutions, firefighters and numerous other types of organizations are exempt from the Pennsylvania law. The information that must be submitted in or attached to the state registration forms varies from state to state. Many states accept a copy of IRS Form 990 in place of some or all of the required financial reports. In addition, other documents, such as articles of incorporation and bylaws, typically are required to be submitted. All information submitted in the registration reports is generally made available to the public. In addition to registration, the states that regulate charitable fundraising generally require covered organizations to file periodic financial reports. In Pennsylvania, for example, covered organizations are required each year to file reviewed financial statements if their

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gross contributions exceed $25,000 per year and audited financial statements if their gross contributions exceed $100,000 per year. To determine specific registration and filing requirements, social sector charitable organizations that are engaged in or about to engage in fundraising should consult these guides, experienced counsel and the agencies in the states in which the organization expects to be “doing business.” “Doing business” in a particular state may include any of the following: (1) soliciting contributions by mail, phone or otherwise from individuals, businesses or other charities located in the state; (2) conducting mission-based programs; (3) employing individuals; (4) maintaining a checking account; or (5) owning or renting property. In some states, local governments or municipalities may also require organizations soliciting charitable contributions to register and file periodic reports. These local regulations are beyond the scope of these guides. Many states, including some that do not require charities to register and report, regulate fundraising activity by professional solicitors and fundraising counsel. These regulations are beyond the scope of these guides. a. Unified Registration Statement The Unified Registration Statement (URS) is an alternative to filing separate registration forms in cases where covered charitable organizations are soliciting contributions in multiple states. The form is an ongoing project of the National Association of Attorneys General (NAAG) and the National Association of State Charities Officials (NASCO) in collaboration with the Multi-State Filer Project, Inc. (MFP). All states that require covered charitable organizations to register will accept the URS in lieu of their own registration form except for the states of Colorado, Florida and Oklahoma. The states that accept the URS form, however, continue to require annual filing of financial information or some other type of financial report. In addition, the following states also require the filing of supplemental forms and/or information in addition to the URS: Arkansas, California, Georgia, Maine, Mississippi, North Carolina, North Dakota, Tennessee, Utah, Washington, West Virginia, Wisconsin and the District of Columbia. Massachusetts accepts the URS for initial registration only. The URS can be downloaded by following the instructions at http://www.multistatefiling.org. This website contains helpful information about registration requirements and an up-to-date list of the states that accept the URS and those that don’t.

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b. Fundraising Via the Internet and the “Charleston Principles” Most of the state statutes that require registration literally apply to internet solicitations that reach residents of the state. However, minimum contacts with the state and the practicality of applying these statutes to activities beyond more traditional fundraising techniques (e.g., telephone, direct mail, in-person solicitations) raise a number of issues that have troubled and perplexed state charity officials. Therefore, the National Association of Attorneys General/National Association of State Charity Officials have published the “Charleston Principles” that provide guidelines to states as to when internet solicitations by otherwise covered charities should be required to register. The Charleston Principles are guidelines only; they are not binding on the states and may change as laws change. Under the Charleston Principles, a charitable organization that has its principal place of business in the state (and is thus “domiciled” in the state) and uses the internet to solicit contributions in that state must register in that state. If the organization is not domiciled in a state, it still must register if it (1) specifically targets persons in the state or receives contributions from persons in the state on a repeated and ongoing or substantial basis through or in response to website solicitations or (2) its non-internet activities alone would require registration in the state (e.g., direct mail or telephone solicitation into the state). The foregoing is a summary only. For more information on the Charleston Principles, including a complete copy with annotations, see www.nasconet.org. It is strongly recommended that social sector charitable organizations intending to solicit contributions via the internet should seek the advice of experienced counsel concerning registration under one or more of the state fundraising laws. c. Prohibited Conduct Most states have statutes that prohibit a variety of false, misleading, unfair and/or deceptive practices in connection with charitable fundraising. For example, states typically prohibit organizations from making statements that funds are being solicited for a charity or will be used for charitable purposes when such is not the case. These statutes authorize state attorneys general to prosecute violations and courts may impose monetary fines and in some cases criminal penalties.

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2. North Dakota Charitable Solicitation Laws a. General The North Dakota Century Code chapter 50-22 regulates fundraising in North Dakota. A charitable organization must register with the North Dakota Secretary of State, and file annual reports to be allowed to solicit charitable contributions in the state. b. Initial Registration Requirements A charitable organization needs to file a registration statement with the Secretary of State on forms prescribed by the Secretary of State. Forms and information are available through the North Dakota Secretary of State’s website at: http://www.nd.gov/sos/nonprofit/charitableorg/index.html The following information must be included on the form: • • • • • • • • • • • • • • • •

Legally established name; Name or names under which it solicits contributions; Form of organization; Date and place of organization; Business telephone number; Street and mailing address of principal office in North Dakota, if any; Name and address of the person having custody of books and records with in North Dakota; Total compensation, including salaries, fees, bonuses, fringe benefits, severance payments, and deferred compensation, paid to employees by the charitable organization and all its affiliated organizations; Federal and state tax-exempt status; Denial at any time by any governmental agency or court of the right to solicit contributions; Date on which accounting year of the charitable organization ends; General purposes for which organized; General purposes for which contributions to be solicited will be used; Methods by which solicitation will be made; Board, group, or individual having final discretion or authority as to the distribution and use of contributions received; and Amount of total contributions received during the accounting year last ended.

The registration statement filed by a charitable organization must include a registration fee of twenty-five dollars and a financial statement of the organization's operation for its most recent twelve-month period immediately preceding the filing of the first registration statement.

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An officer of the charitable organization (or its managing group if there is no board) must execute the registration statement and must certify that the registration statement has been executed pursuant to resolution of the board of directors or trustees. The executing officer also must certify that the board of directors or trustees (or its managing group), have assumed, and will continue to assume, responsibility for determining matters of policy and have supervised, and will continue to supervise, the finances of the charitable organization. c. Revocation of Registration The registration continues unless revoked by a court of competent jurisdiction, by the secretary of state, or as provided in charitable solicitations statutes. If a charitable organization fails to file a registration statement or other information required to be filed by the secretary of state under the charitable solicitations statute, or otherwise violates the charitable solicitations statute, the secretary of state, upon notice by certified mail to its last known address, may deny or suspend the application for registration. An adjudicative proceeding under this chapter must be conducted unless otherwise provided in this chapter. In the event of revocation, the secretary of state shall retain the registration fee. d. Annual Reporting Requirements A charitable organization registered in North Dakota must submit its annual report to the Secretary of State with a ten dollar fee before September first of each year. The Secretary of State may grant an extension to file the annual report if a written application for extension is received before the filing deadline. The annual report must be filed on forms prescribed by the Secretary of State and must include a financial statement (including a balance sheet, statement of income and expense, and statement of functional expenses) covering the immediately preceding twelve-month period of operation. Forms and information can be found on the Secretary of State’s website at: http://www.nd.gov/sos/nonprofit/charitableorg/index.html The financial statement must disclose the following: • • • • • •

Total receipts and total income from all sources; Cost of management and general; Program services; Cost of fundraising; Cost of public education; Funds or properties transferred out of state with explanation as to recipient and purpose, unless the information is not reasonably available, in which case the charitable organization may, with the approval of the secretary of state, provide a reasonable estimate of the amounts transferred;

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Total net amount disbursed or dedicated within this state, broken down into total amounts disbursed or dedicated for each major purpose, charitable or otherwise, unless the information is not reasonably available, in which case the charitable organization, with the approval of the secretary of state, may provide a reasonable estimate of the required information; Names of professional fundraisers used during the accounting year and the financial compensation and profit resulting to each professional fundraiser; and Total compensation, including salaries, fees, bonuses, fringe benefits, severance payments, and deferred compensation, paid to employees by the charitable organization and all its affiliated organizations.

The registration of a charitable organization is ineffective immediately upon its failure to file an annual report, including the payment of all required fees. Any such organization may not file a new registration statement until it files the required annual report with the Secretary of State. Failure to file the annual report and fee as required will mean the organization may not solicit in North Dakota.

e. What Constitutes Solicitation Under the North Dakota Century Code: "Solicitation" and "solicit" mean the request to the public or member of the public for a contribution on the representation that the contribution will be used in whole or in part for a charitable purpose, including: a. An oral request made in person or by telephone, radio, television, electronic communication including the internet, or other advertising or communication media; b. A written or other recorded or published request, that is mailed, sent, delivered, circulated, distributed, posted in a public place, or advertised or communicated through any medium available to the public and described in subdivision a; c. A sale of or attempt to sell any good or service in which the good or service is priced above fair market value or when it is otherwise represented that some portion of the purchase price will be used for a charitable purpose; or d. An announcement inviting the public to attend an assembly, event, exhibition, performance, or social gathering of any kind where admission is conditioned on the receipt of a contribution or at which function contributions will be otherwise solicited.

N.D.C.C. § 50-22-01(7). Furthermore, a solicitation is deemed to have occurred regardless of whether the party solicited makes a contribution. Id.

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f.

Professional Fundraisers

North Dakota defines a “professional fundraiser” as a “person who, for financial compensation or profit, performs for a chartiable organization a service in connection with which contributions are, or will be, solicitied in this state by the compensated person or by a compensated person the person employs, procures, or engages to solict.” N.D.C.C. § 50-22-01(6). The definition also includes a “person who for compensation or profit plans, manages, advises, consults, or prepares material for, or with respect to, the solicitation in this state of contributions for a charitable organization.” Id. North Dakota previously regulated the amount of expenditures that any charitable organization could spend on professional fundraisers at 15% of total moneys available to the charity, but that statute was found to be unconstitutional and currently there are no regulations concerning spending limits for professional fundraisers. See State ex rel. Olson v. W. R. G. Enterprises, Inc., 314 N.W.2d 842 (N.D. 1982). 3. Resources •

National Association of State Charity Officials, http://www.nasconet.org

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“Annual Survey of State Laws Regulating Charitable Solicitations as of January 1, 2009.” Giving USA Spotlight Issue I, 2009 http://www.fundraising123.org/files/spotlight09_issue 1.pdf

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Multistate Filing, The Unified Registration Statement, http://www.multistatefiling.org

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Internal Revenue Service http://www.irs.gov/charities/charitable/article/0,,id=123045,00.html

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50 State Statutory Surveys, Business Organizations, Nonprofit Organizations (Thomson Reuters/West, June 2008)

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The Chronicle of Philanthropy, “Philanthropy This Week”, Episode 15: State Regulators Crack Down on Unregistered Charities” http://philanthropy.com/media/audio/philanthropythisweek

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North Dakota Secretary of State, http://www.nd.gov/sos/nonprofit/charitableorg/index.html

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North Dakota Century Code: N.D.C.C. Chapter 50-22, http://www.legis.nd.gov/cencode/T50C22.pdf

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