| 
Soliciting Charitable Contributions
in Washington State: New Legislation Changes the Rules
By Jeanette
Lodwig
[July 2007]
Washington State, like most states, regulates organizations
that solicit funds from the public within the state for use
for charitable purposes. Most organizations are required to
register with the Secretary of State’s office before soliciting
funds, and must file reports regarding their solicitation activities.
The Washington State legislature has amended the state law
that governs charitable solicitations (RCW 19.09, the Charitable
Solicitations Act), effective July 22, 2007. The intent of the
changes is to increase accountability and transparency of nonprofit
organizations. The significant changes are summarized below.
More information about the new legislation is available on the
Secretary of State’s website, here.
Financial Reporting
The legislation grants the Secretary of State the authority
to establish independent financial reporting requirements for
charitable organizations. These new financial reporting requirements
will not take effect until rules are adopted by the Secretary
of State. Boards of directors of charitable organizations (or
a committee authorized by the board) will be required to review
and accept all financial reports submitted to the Secretary
of State’s Office. The charitable organization may be
subject to penalties (currently up to $1,000) if the financial
information is incorrect in any material way.
- Independent Review of Financial Reports
for Organizations with More Than $1 Million in Annual Revenue.
Organizations with annual gross revenue exceeding an average
of $1 million over the preceding three fiscal years will be
required to submit financial information (such as the IRS
Form 990) that has been “completed or reviewed by a
third party who normally prepares or reviews the forms in
the ordinary of course of their business.”
- Independent Audit Requirement for Organizations
with More Than $3 Million in Annual Revenue. Washington’s
Secretary of State in 2006 proposed controversial
legislation that would have required organizations that receive
more than $1 million in annual gross revenue to have an independent
financial audit. The 2007 legislation instead authorizes the
Secretary of State to adopt rules that will require organizations
with annual gross revenue exceeding an average of $3
million over the preceding three fiscal years to submit
an audited financial statement prepared by an independent
CPA.
Charitable Registration and Filing Requirements
The legislation includes a number of new definitions and clarifies
some pre-existing definitions. There is also a notable deletion.
References to a Parent Organization
have been removed and it will no longer be possible for parent
organizations to file a charitable solicitation registration
and reports jointly with their related chapters, branches or
affiliates. The legislation also makes it clear that registration
with the Secretary of State is not required when an
appeal for funds is made on behalf of a specific individual
and all of the proceeds of the solicitation directly benefit
that individual.
- Commercial Fundraisers. Commercial
fundraisers are required to register with the Secretary of
State and report the fundraising activities that they conduct
for charitable organizations. The law now requires that commercial
fundraisers and charitable organizations file a registration
form with the Secretary of State, including a copy of the
contract between the charitable organization and commercial
fundraiser, before engaging in any solicitations
for charitable contributions (the law formerly required such
a filing within five days of entering into the contract).
The legislation also clarifies who is not a commercial
fundraiser, and therefore not required to register. Specifically,
Fundraising Counsel (a consultant
who does not conduct fundraising campaigns) and a Commercial
Coventurer (an individual or entity that sells goods
or services for profit and makes a representation that part
of the proceeds of a sale will go to a named charitable organization)
are not considered commercial fundraisers.
- Religious Organizations: Not Exempt
From Registration Requirements. While churches or integrated
auxiliaries are exempt from registration and reporting requirements,
all other “religious organizations” are not. A
Religious Organization is broadly
defined to include those entities that are not churches or
integrated auxiliaries. Therefore, nondenominational ministries
and other faith-based organizations generally must register
and report to the Secretary of State.
Charitable Organization Education Program
The new legislation gives the Secretary of State the authority
to develop and operate an education program for charitable organizations,
boards of directors and the general public which will be funded
by additional charitable solicitation registration fees.
Effective Date
This new legislation will take effect on July 22, 2007. However,
many of the changes depend on the Secretary of State adopting
new rules that will be promulgated at some later date.
For more information or to ensure that
your organization is in compliance with charitable solicitation
registration requirements, please contact:
This advisory
is a publication of the Tax-Exempt Organizations Group of Davis
Wright Tremaine LLP. Our purpose in publishing this advisory
is to inform our clients and friends of recent legal developments.
It is not intended, nor should it be used, as a substitute for
specific legal advice as legal counsel may only be given in
response to inquiries regarding particular situations.
Copyright © 2007, Davis Wright
Tremaine LLP.
return to Advisory
Bulletins main page |
