The Nonprofit Chaos of State Regulations
It's surprising to many if not most, but the 50 states and their regulations regarding nonprofits in philanthropy differ immensely. And you might now want to pay attention to this even if you're not located in California.
A recent bill passed by the California legislature and signed into law by the governor is changing the paradigm when it comes to nonprofits and their requirements for registration. Prior to the passing of AB 488, most nonprofits only really had to register if they had property in California or if they actively solicited someone from California. However, that's changing. With the new legislation, nonprofits are going to have to register in some way, shape, or form in California if they have any online platform that anyone from California might be able to access. Basically, if you have a website, you're probably going to have to register.
Whether this is a good idea or not is a debatable conversation. What is not debatable is how this is becoming more challenging for nonprofits, and I might also add consultants, to steer through the morass of 50 different state laws. Just in my case, as a consultant, because of one client who solicits nationally, I ended up having to register in 31 different states. In almost every example, I never had any communication, solicited a gift, or was ever in any of these states. I'm a single entity, with not a lot of people, and complete control of my own endeavors. Thus, while time-consuming and terribly confusing because every state's requirements are different, I can get it done. What about a small nonprofit that has a platform that solicits nationally, with two or three employees max? What are they supposed to do?
I am more of a libertarian at heart than anything. But there's a part of me that would like to see some national standards set in place so that it would ease the pressure for nonprofits dealing with fifty different state laws, 50 different requirements, 50 different applications, 50 different reporting mechanisms, and countless different dates to be concerned about. Having gone through this as a consultant, it is terribly stressful and confusing, even with a law degree and time. For nonprofits that are being forced to follow 50 different state laws, I can't imagine how compliance can be done at 100% without immense resources and time.
There's an old saying. How California goes is how the nation goes. While some might argue certain pieces of that depending on their subject matter, my guess is other states will follow along with this nonprofit requirement, even complicating the situation more so.
