54 54. See § 6.15.
55 55. These provisions are of dubious legality (see § 4.5).
56 56. Principally, the federal annual information return (Form 990). In general, see § 5.9, Chapter 7.
57 57. This exemption, which of course exempts all or nearly all charitable entities, is available for all organizations that are tax exempt by reason of IRC § 501(c)(3).
58 58. See § 4.2(g).
59 59. A state may have an alternative to the use of bonds, in that a certificate of deposit, letter of credit, or U.S. obligation can be filed in lieu of a bond. This approach allows investment assets to be pledged while not disturbing the underlying investment. It eliminates the expense of premiums, and reduces the time and expense associated with renewals of bonds.
60 60. See § 3.2(h).
61 61. See § 4.1.
62 62. See § 4.3.
63 63. Kentucky State Police Professional Association v. Gorman, 870 F. Supp. 166 (E.D. Ky. 1994).
64 64. National Federation of Nonprofits v. Lungren (N.D. Cal., order issued Mar. 29, 1995).
65 65. See § 4.15.
66 66. See § 3.2(h).
67 67. These requirements are discussed in § 8.6.
68 68. This is because this type of charitable solicitation is not usually regarded as doing business within a state (see infra note 78).
69 69. This type of rule has been upheld in the courts (e.g., Lewis v. Congress of Racial Equality, 274 S.E.2d 287 (S.C. 1981); Blenski v. State, 245 N.W. 2d 906 (Wis. 1976); People v. Caldwell, 290 N.E.2d 279 (Ill. 1982)). In Blenski, the court stated that the “crime of unauthorized use of names is directed at protecting the public against being misled and not protecting the person whose name is used. This purpose does not require that liability for this crime be imposed for each individual person whose name is used, particularly where … the unauthorized uses are simultaneously committed” (at 911).
70 70. This type of provision has been upheld in the courts (e.g., American Gold Star Mothers, Inc. v. Gold Star Mothers, Inc., 191 F.2d 488 (D.C. Cir. 1951); People ex rel. Brown v. Illinois State Troopers Lodge No. 41, 286 N.E.2d 524 (Ill. 1972)). An illustration of the misapplication of this type of rule by regulatory authorities appears in City of Evanston v. Evanston Fire Fighters Association, Local 742, International Association of Fire Fighters, AFL-CIO-CLC, 545 N.E.2d 252, 262–266 (Ill. 1989).
71 71. In general, see § 9.5.
72 72. This proposed multistate legend was prepared by Robert S. Tigner, General Counsel, Association of Direct Response Fundraising Counsel. His contribution is gratefully acknowledged.
73 73. A fiduciary is a person who has special responsibilities in connection with the administration, investment, and distribution of property that belongs to someone else; this range of duties is termed fiduciary responsibility.
74 74. An excellent discussion of the role of an attorney general in overseeing charitable organizations appears in City of Evanston v. Evanston Fire Fighters Association, Local 742, International Association of Fire Fighters, AFL-CIO-CLC, 545 N.E. 2d 252, 256–262 (Ill. 1989).
75 75. This type of restriction, however, is unconstitutional (see § 4.5).
76 76. E.g., Commonwealth v. Events International, Inc., 585 A.2d 1146 (Pa. 1991); People ex rel. Scott v. Gorman, 421 N.E.2d 228 (Ill. 1981); People ex rel. Scott v. Police Hall of Fame, Inc., 376 N.E.2d 665 (Ill. 1978). In general, Suhrke, “What Can Be Done about Fund Raising ‘Fraud’?,” XXVI Phil. Monthly (No. 6) 5 (1993).
77 77. Details about this project and the forms are available at www.nonprofits.org/library/gov/urs.
78 78. One court observed that “[i]t is doubtful … whether the solicitation of funds for a charitable purpose is, to use the statutory words, the ‘carrying on, conducting or transaction of business’” (Lefkowitz v. Burden, 254 N.Y.S.2d 943, 944–945 (1964)). A subsequent court opinion, however, suggested that the solicitation of funds constitutes doing business in a state (Commonwealth v. Events International, Inc., 585 A. 2d 1146, 1151 (Pa. 1991)).Clearly, a charitable organization organized in one state and maintaining an office or similar physical presence in another state is doing business in the latter state. The general rule is that merely mailing charitable solicitation material into a state is not doing business in that state, although a contrary approach can be established by statute or regulation. In many states, the determination as to whether an organization is doing business in a state is under the jurisdiction of the secretary of state, whereas the registration and reporting requirements of a charitable solicitation act are administered by the attorney general. In some states (such as California), a determination that a charitable organization is doing business in the state leads to a requirement that the organization file for and receive a ruling as to its tax-exempt status in the state (or else be subject to state taxation). Thus, fundraising in a state can entail an obligation on the part of the charitable organization to file with three separate agencies in the state.
79 79. E.g., Horner and Makens, “Securities Regulation of Fundraising Activities of Religious and Other Nonprofit Organizations,” XXVII Stetson L. Rev. (No. 2) 473 (Fall 1997).
80 80. E.g., Missouri ex rel. Nixon v. RCT Development Association, 290 S.W. 3d 756 (Mo. Ct. App. 2009) (applying a state's merchandising practices act (a consumer protection law) to enjoin a charitable fundraising scheme); People v. Gellard, 68 N.E.2d 600 (N.Y. 1946). A challenge to a state's use of an unfair trade practices act and state sweepstakes law to regulate charitable fundraising failed, with the court finding that the plaintiffs lacked standing to bring the suit (American Charities for Reasonable Fundraising Regulation, Inc.