CORPORATE TRANSACTIONS & COMPLIANCE BLOG

State Disclosure Statement Requirements for Nonprofits

By: Ron Barrett, COGENCY GLOBAL INC. on Mon, Jul 20, 2015
nonprofit disclosure statementCharities that solicit in multiple states are subject to state charitable solicitation laws, most of which require written disclosure statements at the point of solicitation by nonprofits and their paid fundraisers. For example, solicitation activities via emails, direct-mail campaigns, billboards and, in some states, websites (e.g. Florida) require nonprofits to provide potential donors with a written disclosure statement. In most states, the purpose of these disclosure statements is to inform potential donors that the nonprofit organization conducting the solicitation is charitable, that donations to the charity are tax deductible, and where to obtain additional information about the charitable organization.

Fortunately, not all states require a disclosure statement, but several states do have statutory requirements that a disclosure must be provided to potential donors on any written solicitation. For charities that limit their solicitation to one state, this is an easy task to comply with; simply determine if you are located in a state with a charitable solicitation statute that requires a disclosure statement and, if so, make sure the appropriate statement is included on any written request for charitable contributions.

 

Sample Statutory Provisions and Disclosure Statement: Maryland
Below is the portion of Maryland’s statute relating to the needed disclosure, along with sample wording:

§ 6-411. Disclosure statement. (b) Required. — (1) A charitable solicitation that is a specific written request to the public for a charitable contribution shall contain a disclosure statement. (2) A written receipt for a charitable contribution shall contain a disclosure statement. (c) Conspicuous display. — The disclosure statement shall be displayed conspicuously on a charitable solicitation and on a receipt for a charitable contribution.

The statute defines a disclosure statement in Maryland as follows:

§ 6-101. Definitions. (g) Disclosure statement. — "Disclosure statement" means a written statement that includes the following information: (1) a statement that a copy of the current financial statement of the charitable organization is available on request; (2) the name of the charitable organization and the address and telephone number where requests for a copy of the financial statement should be directed; and (3) a statement that, for the cost of copies and postage, documents and information submitted under this title are available from the Secretary of State.

Sample Maryland disclosure statement:

A copy of [name of charity]’s current financial statements may be obtained by contacting us at: [address and telephone number of charity]. Documents and information submitted to the state of Maryland under the Maryland Solicitations Act are also available from the office of the Secretary of State, State House, Annapolis, MD 21401 for the cost of copying and postage.

Note that some states, such as Maryland, have specific requirements regarding the placement of the written disclosure; it must be conspicuous and in a font that can be easily read. In New York, the disclosure statement must be 10-point bold font and in North Carolina it must be underlined or 9-point bold font.

Thus, a disclosure statement in 5-point font requiring a magnifying glass to read, placed under an envelope flap, will not comply with the statutory requirement regarding placement and legibility in some states.

Also, keep in mind that some types of nonprofits, such as religious organizations and educational institutions, are exempt from the written disclosure statement requirements, so a review of the specific state statutes where solicitation occurs is needed.

 

Exemptions to Disclosure Statement Requirements
In Maryland, the statute includes the following exemptions:

§ 6-102. Scope of title. (c) Exemptions. — (1) Except as provided in paragraph (2) of this subsection, a charitable organization is exempt from the registration and disclosure requirements of this title if the charitable organization: (i) does not employ a professional solicitor; and (ii) 1. solicits charitable contributions for a named individual and the gross amount is delivered to the individual; 2. A. is a religious organization, a parent organization of a religious organization, or a school affiliated with a religious organization; and B. has in effect a declaration of tax-exempt status from the government of the United States; 3. solicits charitable contributions only from its members; 4. does not receive more than $25,000 in charitable contributions from the public during the year for which a registration statement and annual report otherwise would be required; or 5. only receives contributions from for-profit corporations and organizations determined to be private foundations by the government of the United States.

However, keep in mind that an exemption request is required in Maryland, and in several other states, before the state will consider a charity exempt from the registration or disclosure statement requirements.

To assist nonprofits in complying with disparate state disclosure statement requirements, a nationwide Model Disclosure Statement is available here. The text in this statement can be used by nonprofits that solicit nationwide to comply with state disclosure statement requirements.

 

 

This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.

Topics: Nonprofit Registration and Compliance