Tax-Exempt Organizations Advisory Bulletin
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 be given only in response to inquiries regarding
particular situations. Attorney Advertising. Prior results do not
guarantee a similar outcome. Thank you.
Copyright © 2007, Davis Wright Tremaine LLP.
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