Nonprofit charities registered to solicit charitable donations in California are aware of the ongoing requirement to file an
Severe Penalties for Filing Inaccurate Renewals or Not Filing on Time
The amended regulations that recently became effective provide harsh consequences to charities that don’t file their California charitable registration renewals on time or file them with inaccurate information. The new penalties include:
(a) Misuse of charitable assets.
(b) False or misleading statements and/or conduct in connection with a solicitation for charitable purposes.
(c) False or misleading statements in a document required by law to be filed with a government agency, including the annual registration and renewal reports filed with the Attorney General and the IRS Form 990 filed with the Internal Revenue Service (IRS) and California Franchise Tax Board (FTB). The omission of material information in response to a question in a document required by law to be filed with a government agency constitutes a false or misleading statement.
(d) Failure to comply with the Standards of Conduct for nonprofit corporations in sections 5230 through 5239 and 7230 through 7238 of the Corporations Code.
(e) Failure to prepare annual financial statements using generally accepted accounting principles that are audited by an independent certified public accountant in conformity with generally accepted auditing standards, as required by Section 12586, subdivision (e), of the Government Code.
(f) Failure to produce records in response to a subpoena or written request from the Attorney General.
(g) An adverse action by a governmental entity related to the operation of a charity or the conduct of a solicitation for charitable purposes, including misuse of charitable assets and unlawful or misleading conduct related to solicitation for charitable purposes.
Also, the new regulations provide that a charitable registration shall be automatically suspended if: the organization’s tax-exempt status is suspended or revoked by the IRS or FTB; the registrant fails to file Form RRF-1 for three consecutive years; or a corporation’s corporate status is suspended or revoked by the California Secretary of State.
These consequences make it more important than ever for California charities to make sure they are in full compliance with charity registration and renewal requirements.
For additional information and insights relating to the requirements and impact of these new regulations, please see the following:
California’s New Regulations: The Start of a New Problematic Trend in State Charity Oversight? by Erin Bradrick, Nonprofit Quarterly, December 18, 2015
Amendments to Regulations Regarding Nonprofit Organizations (Title 11, Chapter 4, Sections 313 through 316; Title 11, Chapter 15, Sections 999.6 through 999.9.5) (Effective 1/1/2016)