All Eyes on California’s Expanded Regulation of Charitable Fundraising
As means for charitable giving continue to evolve, regulators nationwide are calling California’s broadened regulatory reach over modern-day charitable fundraising a “pilot program.”1 The newly-passed law, AB 488, brings the categories of regulated entities in line with fundraising practices that are now commonplace in the world of online charitable giving – peer-to-peer and crowdfunding, DIY campaigns, and more.
If you offer fundraising online, conduct charitable sales promotions, or offer donations at checkout, there will be new requirements to navigate. California’s new law extends to for-profit companies not clearly regulated under the current “commercial coventurer” and other categories, but also changes regulation of those already within the law’s reach. If your organization takes certain online actions to facilitate donations or grants to charities or non-profits, it could be considered a “charitable fundraising platform” and subject to new registration, annual renewal, annual report filing, disclosure, receipt provision, and other requirements under California’s expanded regulatory framework, effective January 1, 2023.2 “Platform charities” that solicit or facilitate the giving made via a charitable fundraising platform will also face new requirements.
The California Department of Justice was forthcoming about enforcement priorities in various meetings about the bill. Companies are encouraged to adopt measures in the new law and modify their conduct before the effective date, especially if they are not currently registered under the existing system.
Newly-Regulated Activities
Online fundraising activities subject to new regulation include, for example:
Listing or referencing one or more charities that can receive donations or grants from users;
Offering peer-to-peer charitable fundraising;
Permitting users to select charities to receive donations from others or made by the platform itself; or
Providing charities with certain electronic means to solicit or receive donations through it, including through peer-to-peer charitable fundraising (which may be integrated with the charity’s own platform).
Requirements for these activities may include registration and filing, specific pre-donation disclosure requirements, tax donation receipt requirements, only allowing charitable fundraising platforms and platform charities to solicit for charities in good standing, and that funds solicited on behalf of a charitable organization must be kept separate from funds of the fundraising platform or platform charity. The law permits fundraising using a charities’ name and other specified information in the act, including (thanks to an amendment in recent months) publicly-available information like mission statements, however, the charity’s prior written consent is required if other information is displayed and statutory conditions are not met.
CCV Programs, Charitable Sale Promotions, and Register Round-Ups
Legislative history for AB 488 revealed a lack of clarity and agreement about whether these types of more traditional fundraising programs were already subject to registration and other requirements. The future is certain: compliance should be reconsidered in light of the updated law. Charitable sales promotions should be registered under the new category of “charitable fundraising platform” if any portion is conducted online and for the benefit of 6 or more end-charities in a year, otherwise the promotion will continue to be governed by the existing CCV laws. As AB 488 currently stands, online donation checkout programs will need to register as a “charitable fundraising platform” and in-retail “register round-ups” (or donation at checkout) should be evaluated for compliance with the existing “trustee” laws.
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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.