California Gifts Us Proposed Regulations Around Charitable Fundraising

by: Heather Nolan

As a timely move for this giving season, California’s Department of Justice recently issued proposed regulations (“regs”) for charitable fundraising and other donation-related activities.  Once finalized and passed, the regs will help effectuate California Assembly Bill No. 488 (“AB 488”), passed in 2021, which expands California’s regulation of those involved in charitable fundraising.  The proposed regs clarify the requirements for charitable fundraising platforms, platform charities, and related solicitations, the former of which California has been leading the way to regulate.  Anyone who invites or facilitates charitable donations, including through peer-to-peer fundraising, should consider whether and how AB 488 and the proposed regs will impact their activities.

Members of the public can submit written comments about the proposed regulations, by mail or email no later than 5:00 pm PT on January 2, 2024.  If your organization has comments to the proposed regulations, be sure to see the Department’s Tips for Making Effective Comments.

Amongst other things, the proposed regulations include the following notable points:

  • Although AB 488 expanded registration requirements for certain entities involved in charitable fundraising, under the proposed regs, most of those entities will not have to file operational documents like articles of incorporation and bylaws (i.e., commercial fundraisers for charitable purposes, fundraising counsel for charitable purposes, commercial coventurers, and charitable fundraising platforms).

  • “Conspicuous” for disclosure purposes means adjacent to the content being explained to prevent a likelihood of deception, confusion, or misunderstanding.  Additional details are included for when adjacent disclosures are not possible.

  • “Platform” means a website, mobile device application, computer software application, or other internet-based interactive electronic medium.

  • “Fee”. “Misuse”, “Digital Processing Fee”, and other terms would now be specifically defined in the regs.

  • They make clear that platform charities and fundraising platforms working together will have various specific compliance obligations. 

  • The 5 types of solicitation defined in AB 488 are further defined in the proposed regs. They cover various nuances along the spectrum of fundraising activities happening in the industry, including micro and round up donations by platform users, peer-to-peer fundraising, selecting charities to benefit from donations based on the purchases made or other activity performed by platform users, and private-label or customizable software that allows a charity to solicit donations.

  • The various details like the forms and deadlines for registration are specified by filing category.

  • The proposed regs make clear what qualifies as a charity “in good standing” and provides that funds may be held for the time it takes to determine an alternate if a charity is found not in good standing.

  • The proposed regs allow for donations to be solicited for charities that are not in good standing on the CA AG Registry Search Tool, as long as it is not on the May Not Operate or Solicit for Charitable Purposes List.

  • The solicitation information required to be disclosed under AB 488 are clarified by solicitation type.

  • The expanded definition of “material facts” to be disclosed to the CA AG in connection with a registration includes facts that are important, significant, or essential to a reasonable person in deciding whether to engage or not engage in the particular action, including known or anticipated opposition to the proposed action.

  • The proposed regs spell out the requirements for consent by a charity to solicit donations on its behalf, including listing it as a benefitting charity on a fundraising platform.

  • Additional details beyond what is in the text of AB 488 are provided about the required timing for certain aspects of fundraising, including donations to be made and providing of receipts.

  • The proposed regulations prohibit diversion or misuse of peer-to-peer donated funds and require funds to be sent to the recipient charitable organization referenced in solicitations no later than 10 business days after receipt, otherwise the person must register as a trustee.

Originally published by InfoLawGroup LLP. If you would like to receive regular emails from us, in which we share updates and our take on current legal news, please subscribe to InfoLawGroup’s Insights HERE.

 

Heather Nolancharitable promotions, Charitable Fundraising, charitable platforms, Cause Marketing, California