At long last, the wait is over! California has finally issued registration, reporting, and disclosure regulations for Charitable Fundraising Platforms. And, even though they took almost 2 years to be finalized and published, these new requirements become effective June 12, 2024.
As noted by the Attorney General in its press release, the new regulations are intended to ensure that charitable fundraising platforms and platform charities:
- Register and submit annual fundraising reports to the Attorney General's Registry of Charities and Fundraisers, with filings made available for public viewing.
- Provide conspicuous disclosures in their solicitations, intended to prevent public deception, confusion, and misunderstanding.
- Promptly issue tax donation receipts, when applicable.
- Promptly distribute donations to charities.
- Only solicit for charities that have provided prior consent, unless certain criteria are met that safeguard against harm to charities and the public.
- Only solicit for charities in good standing in California and with the IRS.
As a quick refresher, back in October 2021, California amended The Supervision of Trustees and Fundraisers for Charitable Purposes Act ("Act") in an effort to regulate online platforms that solicit for, or allow others to solicit for, charities. (See our post about the law here.)
The law created two new regulated classes: "charitable fundraising platforms" and "platform charities." An entity is considered a "charitable fundraising platform" in California if it, among other things, offers round-up and donation-at-checkout program on an e-commerce site, offers a platform for charitable organizations to solicit and receive donations, and/or conducts commercial co-venture campaigns that are at least partially online with seven (7) or more charitable organizations in a calendar year. Thus, those of us primarily representing companies not principally engaged in charitable activities but which conduct commercial co-ventures and other cause marketing activities with charities have been eagerly awaiting more guidance relating to charitable fundraising platforms.
The new regulations distinguish and define different solicitation types, A through E, addressing various types of charitable activities, including round-up programs, crowd-funding, commercial co-venturing and more. One item of note is that "free action programs" (or "good will" promotions as we typically call them) are considered commercial co-venture activities for determining whether they meet the threshold of being a "charitable fundraising platform."
So, what do you have to do if you're deemed a Charitable Fundraising Platform in California? You must, among other requirements:
- register before "soliciting, permitting, or otherwise enabling acts of solicitation" by completing the online registration process and paying a $625 registration fee;
- renew annually by January 15th; and file annual reports;
- only solicit on behalf of charitable organizations considered in good standing (California has created a Registry Search Tool entities can use to search for and confirm whether an organization is in good standing);
- have an agreement with the charitable organization that complies with specific requirements set forth in the regulations, including inclusion of certain mandatory provisions;
- comply with the donation payment deadlines (e.g., 30 days after the end of the month in which the donations were made); and
- make required disclosures to consumers.
Unfortunately, the regulation requirements are not one-size-fits-all. An advertiser will need to determine under which solicitation type its activities fall in order to properly comply. And, of course, how the Office of the Attorney General enforces these requirements in the future remains to be seen. Stay tuned!
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