Posted by Christina K. Bell
To protect residents most states have laws requiring 501(c)(3) charitable organizations that solicit contributions from the public to register and file certain periodic reports. Delaware is unique in that it currently does not have a charitable solicitation registration requirement, and no annual reports are required to be filed in order for Delaware organizations to solicit contributions. Delaware’s surrounding states of New Jersey, Maryland and Pennsylvania each have a charitable solicitation registration requirement. In an attempt to follow the example of the majority of states that have these requirements, Delaware House Bill (HB) 187 was introduced on June 11, 2013 and currently resides with the House Economic Development/Banking/Insurance/Commerce Committee. The bill is scheduled to come out of committee during January 2014.
HB 187 will require, among other things, that charitable organizations (except those exempted), professional fundraising counsel, and professional solicitors who solicit in Delaware or engage in solicitation activities directed to Delaware citizens register with the State prior to conducting any solicitation. In addition to registration these charitable organizations will be required to annually disclose certain financial information to the State. Sponsors and supporters of the bill believe these regulations will provide Delaware citizens with the necessary tools and information to make informed decisions about which charitable endeavors to support, facilitate transparency and confidence in the sector, enhance public confidence in legitimate charitable organizations, and safeguard the citizens of Delaware against fraudulent and misleading charitable solicitations.
Charitable organizations that are exempt from the registration and filing requirements include the following. For a complete listing of which organizations are exempt refer to House Bill 187.
- Religious organizations/societies that are exempt from filing an IRS Form 990 federal annual information return
- Charitable organizations that do not intend to, and do not actually, raise or receive gross revenue excluding grants from governmental entities or from organizations exempt from federal taxation under § 501(c)(3) of the federal Internal Revenue Code of 1986, as amended, in excess of fifty thousand dollars ($50,000) during a fiscal year, or do not receive contributions from more than ten (10) persons during a fiscal year
- Parent-teacher associations or educational institutions
- Nonprofit hospitals licensed by the State, or any similar provision of the laws of any other state
- Governmental units or instrumentalities
All nonexempt charitable organizations who solicit contributions within Delaware will be required to register with the State. Upon this initial registration a $25 administrative filing fee will be due. In addition, these organizations will be required to annually submit to the Director of the Consumer Protection Unit of the Department of Justice for the State of Delaware (Director), no later than eight (8) months following the close of its fiscal year, either an unaudited, reviewed or audited financial statement or a copy of their IRS Form 990, depending on their gross revenue. A filing fee ranging from $10 to $100 must accompany each annual filing.
A charitable organization with gross revenue in excess of $1,000,000 must annually submit to the Director audited financial statements with an audit report prepared by an independent certified public accountant. A charitable organization with gross revenue less than $1,000,000, but nonetheless subject to a requirement imposed by any governmental authority or third party to provide an audit report prepared by a certified public accountant, must annually submit to the Director audited financial statements with an audit report. A charitable organization with gross revenue in excess of $500,000 but less than $1,000,000 must annually submit to the Director a set of reviewed financial statements with an independent certified public accountant review report. A charitable organization with gross revenue less than $500,000 may submit annually to the Director either a copy of their IRS Form 990 or a set of internal financial statements. The internal financial statements may be requested to be submitted in a format prescribed by the Director.
The full bill can be found at www.legis.delaware.gov. It is strongly recommended that your charitable organization take the time now to thoroughly read and understand all of the proposed requirements and regulations included in this bill. Questions and/or concerns regarding this bill can be forwarded to the Delaware Alliance for Nonprofit Advancement (DANA).