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Nonprofit regulation in Maryland
 in Maryland |
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Nonprofit regulation in Maryland involves a complex set of rules that govern nonprofit organizations and charitable giving throughout the state. Major issues surrounding nonprofit regulation nationwide include the following:
- contribution limits,
- donor disclosure, and
- the redefinition of issue advocacy.
Maryland is one of 39 states that require charitable organizations, and those intending to solicit on their behalf, to register with the state in order to solicit contributions, whether they are a Maryland organization or based out-of-state. In Maryland a number of groups and organizations are exempt from registration. Groups that are exempt must, however, apply for exemption; it is not automatic.[1]
Maryland is one of 32 states that allows registrants to use either the Unified Registration Statement (URS) or the state registration form.[2] Only seven states requiring registration do not accept the URS.
- Note: The following is not a how-to guide in managing an organization's registration and reporting requirements, but rather an attempt to share information about the relative degree of regulation governing nonprofit charitable activity at the individual state level. The information on this page was last updated in early 2015.
Background
According to the Foundation Center, there are over 1.5 million nonprofit organizations in the United States.[5] Section 501 of the U.S. tax code outlines which types of nonprofit organizations may be granted tax exempt status by the Internal Revenue Service. The section of this code that provides for exemption is section 501(a), which states that organizations are exempt from some federal income taxes if they fall under sections 501(c) or 501(d), or under section 401(a).[6]
Organizations classified as 501(c)(3) are nonprofit charitable, religious and educational organizations. These include organizations like the Red Cross and Habitat for Humanity as well as the American Civil Liberties Union and the Lucy Burns Institute, which provide, as defined in the federal code, “instruction of the public on subjects useful to the individual and beneficial to the community.”[7] Organizations granted 501(c)(4) status are political education organizations, and can engage in political lobbying. This includes donations to political committees that support or oppose ballot measures, bond issues, recalls or referenda. 501(c)(4) organizations can thus engage in issue advocacy, but they are not allowed to expressly advocate for the election or defeat of a particular candidate.
While the Internal Revenue Service designates eligible nonprofit charitable organizations with a federal tax exempt status, individual states require their own level of regulation and reporting, particularly when organizations attempt to solicit fundraising contributions. The amount of regulation required differs by state, as does the degree to which state regulations protect the privacy of individual donors. Three states, for instance, require annual copies of IRS Form 990 (schedule B), which lists individual contributors who contribute over a specified amount. Research shows that attempts to make contributions more transparent has an unintended negative effect on the number of contributors who give, as well as the amount.[4]
Governing agencies
The Maryland Secretary of State is the authority in the state that oversees rules governing donor solicitation and registration.
See law: Maryland Annotated Code, Business Regulation Article, sections 6-101 through 6-701
Registration requirements
Any nonprofit group or organization located in Maryland must register with the Maryland Secretary of State. Any non-exempt nonprofit, in any state, intending to solicit in Maryland must also register, along with anyone intending to solicit in Maryland on behalf of a nonprofit. Non-exempt nonprofits might include traditional charitable organizations like the Red Cross or Habitat for Humanity, educational or policy organizations like the American Civil Liberties Union, or issue advocacy groups like the League of Conservation Voters.
Exemptions
A number of groups are exempt from registering in Maryland. Any group, however, that is exempt must apply for exemption; it is not automatic. Groups that believe they are exempt must submit a letter to the Maryland Secretary of State, Charitable Organizations Division, proving that they qualify. They must cite the relevant state statutes, include an IRS determination letter, and an IRS Form 990, if available.
The following groups are exempt from registering:[1]
- Any group not intending to raise $25,000 in a year, if they have only unpaid fundraising volunteers (groups that raise less than $25,000 but who do have paid fundraisers must pay an annual fee of $50. Contributions for these purposes do not include government grants or membership fees)
- Religious groups, providing they have an IRS determination letter
- Membership organizations that raise contributions solely from members (members in qualifying groups must be receiving some benefit or be able to vote for offices governing the group)
- Educational organizations
- Appeals for named individuals, if no paid fundraisers are used and all money goes to the named person
- Groups that only receive grants from for-profits or private foundations
- Public safety groups, such as volunteer firefighters
Procedures
Nonprofits registering in Maryland can use either the Unified Registration Statement (URS) form or the state form.[1]
Documents
The following documents are required along with the registration form:[1]
- List of names and contact info of the board of directors (addresses must be either home or alternative business address)
- Copy of bylaws or charter
- IRS determination letter
- Copies of all contracts with paid fundraisers used in Maryland
- Completed IRS Form 990
- If a group doesn't file 990s, they must file "Form COF-85, Financial Form to be Filled Out by Organizations Not Filing Form 990." If a group's 990 is just incomplete, they must submit an approved IRS Form 8868, which is the IRS request for a 990 extension filing deadline
- Note: if a group raised over $200,000 but less than $500,000, they must submit a financial review by a Certified Public Accountant. If they raised over $550,000, they must submit a copy of an audit by a Certified Public Accountant.
Signature and fee
A signature of either the president, chairman, or principal officer is required; notarization is not necessary.
The registration fee is a sliding scale, ranging from $0 to $300, depending on how much a group received in contributions.[8][1]
Filing procedures
Registration materials must be mailed to:[1]
Office of the Secretary of State
Charitable Organizations Division
State House
Annapolis, MD 21401
Renewal
Organizations must file a renewal six months after the end of their fiscal year. To do so, they should mail an "Annual Update of Registration" form and include the following:
- Signed IRS Form 990, or the deadline extension already mentioned
- Signed certification that the 990 submitted is the one submitted to the IRS
- Copies of fundraising contracts used in Maryland
- Updated list of contact info for board of directors; any changes to initial registration documents
- A financial report
Financial reporting
If an organization raised over $200,000 but less than $500,000, it must submit a financial review by a Certified Public Accountant. If it raised over $500,000, it must submit a copy of an audit by a Certified Public Accountant.[1]
Extensions
Financial reports must be delivered on time; fees will be incurred otherwise.[9][1]
Fee
The fee for renewal is the same sliding scale used for initial registration.[1]
Recent news
This section links to a Google news search for the term "Maryland + donor + privacy"
See also
External links
Footnotes
- ↑ 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 Fishman, S. & Barrett, R. (2012). Nonprofit Fundraising Registration: The 50 State Guide. NOLO.
- ↑ "Multistate Filing Form," accessed December 17, 2014
- ↑ Guidestar, Fundraising: What Laws Apply?" accessed February 18, 2015
- ↑ 4.0 4.1 London School of Economics, "Campaign finance laws that make small donations public may lead to fewer people contributing and to smaller donations," January 7, 2015
- ↑ Foundation Center, "Frequently Asked Questions," accessed December 17, 2014
- ↑ Cornell University Law School, "26 U.S. Code § 501 - Exemption from tax on corporations, certain trusts, etc," accessed January 13, 2015
- ↑ Cornell University Law School, "26 CFR 1.501(c)(3)-1 - Organizations organized and operated for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or for the prevention of cruelty to children or animals," accessed January 13, 2014
- ↑ Maryland Secretary of State, "Registration, Frequently Asked Questions & Checklist," accessed February 2, 2015
- ↑ Maryland Secretary of State, "Registering a Charity," accessed February 2, 2015
