Whether it’s deciding when to file initial charitable solicitation registrations or when to marry, in both situations a thorough evaluation of the consequences needs to happen. Are you really sure this is what you want to do? If it doesn’t last, are you ready to pay up lawyer fees and give half of your assets away? An organization can also throw lots of money out the window by jumping into charitable registration too quickly.
One of the most important considerations when filing an initial charitable registration is timing. Often, organizations decide they are ready to register but don’t know exactly how involved the registration process may be. How much time it will require and the costs involved must be taken into account, along with legal considerations. Most states require the registration to report financial information from the most recently completed fiscal year IRS Form 990 and this is where a timing dilemma may arise.
Register Now or Wait until the 990 and Audit Are Ready?
When determining when to file a nonprofit organization’s initial charitable registration, there are important timing issues to be considered. An organization may be developed to the point where it needs to file a nationwide charitable registration because it has started to receive a lot of contributions from donors in many states. Or perhaps the organization has entered into a commercial co-venture contract (a/k/a charitable sales promotion) with a brand-name for-profit partner. In either of these cases, the organization wants to comply with the state charitable solicitation statutes and is usually eager to register nationwide.
Take for example, an organization named “Divorces R Us Inc.” that is ready to file initial charitable registrations nationwide in January 2016. Their most recently completed fiscal year ended on 6/30/2015, BUT they have not finished auditing or filing their 990 with the IRS for that year. Auditing and filing the 990 may take a few months. So, the most recently completed and filed 990 for the organization is for the fiscal year ended 6/30/2014. It’s difficult to believe that an organization can file an initial registration using financial data from literally two years ago, but it is feasible. However, if the initial registration is filed using the 990 and/or audit for the year ended 6/30/2014, a renewal of the registration for the fiscal year 7/1/2014 through 6/30/2015 will have to be submitted shortly thereafter and in accordance with state charitable renewal deadlines.
We are left with two options:
- Register and file a renewal soon thereafter; or
- Wait to file an initial charitable registration until the 990 and audit for the year ended 6/30/2015 have been completed.
Before you say “I do” to either of these approaches to charitable registration, review our helpful tips below.
10 Tips to Help You Decide When to File Initial Charitable Registrations
Make the smartest and most efficient decision for when to register to solicit by prioritizing and considering the following options:
- Make a list of top donor states and states where the organization actively solicits donations.
- Make a list of states where events will be held in the next 6 months.
- Cross-reference lists from No. 1 and 2 against the charitable solicitation statute registration requirements for each state.
- Determine how long it will take for the current audit to be finished.
- Check the organization’s budget for registrations. Filing a registration and a renewal soon thereafter may be costly.
- Examine how the state calculates their renewal filing deadlines. Is it based on the IRS deadline model? Are extensions allowed? Does the renewal deadline fall on the anniversary of the registration? Or does the state have a statutorily fixed deadline for all organizations?
- Assess how long a state may take to approve the registration.
- Finalize your list with the top states that require registration.
- Your final list will be the states you deem most important to register in as soon as possible. After consulting with legal counsel, you may decide that the other states can wait until the more current 990 is ready.
- Consider enlisting the assistance of a service company, to address any concerns and questions or take advantage of do-it-yourself resources to simplify the filing process.
Whether deciding when to file an initial charitable registration or when to marry your significant other, careful deliberation as to when to go forward needs to be done to avoid disappointment as well as wasted time and money.
This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.