If my charity has a donate button am I required to register in all states?

One of the challenges of running a distributed charity is that the charitable solicitation laws do not necessarily reflect the Internet age and the various states approach charitable solicitation registration from many different perspectives. One frequent question is whether simply placing a "donate now" button on a website requires a charity to immediately register in every state's charity registry. The answer has some complexity. It is not a simple "yes" or "no."

Most states have some sort of requirement that people who solicit for charitable donations in that state have to register with some government agency. Sometimes it is the Secretary of State or the equivalent, sometimes it is the Attorney General's office. 

States that have general jurisdiction over a charity.

As nonprofit organizations ask which states might require them to register as charities, a first question to consider is which states have "general jurisdiction" over the nonprofit. Most nonprofits are corporations, formed under the authority of a state's laws. But even those that are not corporations, such as LLCs, unincorporated associations, or charitable trusts, likely have some form of "organizing document." For an LLC, that would be its articles of organization. For an unincorporated association, its articles of association or constitution. For a trust, it would be the trust agreement or the declaration of trust. For all of these, the state where the organizing document was created is a state that has general jurisdiction over the charity. You have to follow the laws of that state.

In addition, a charity might have another state that can exercise general jurisdiction over it: the state where its principal place of business resides. Like for-profit corporations, a charity can be incorporated in one state but have the center of its operations in another state. In those cases, the state where the principal place of business resides can exercise jurisdiction over the charity.

Example: A founder forms a nonprofit public charity in California and incorporates there. A few years later, the founder (still a board member) moves to Arizona. Over time, the charity continues to operate and the board of directors are drawn from locations all around the country. The organization starts to use an Arizona address as its primary address, and has a small office in a building in Arizona. At this point, California remains the state of incorporation and Arizona has become the charity's principal place of business. Both California and Arizona can exercise general jurisdiction over the charity.

Another way that a nonprofit organization can make itself subject to the jurisdiction of a state is by registering as a foreign corporation that intends to do business in the state. For example, if a charity located in one state has an employee in and wants to open a bank account in another state, it will likely need to register as a foreign corporation in that second state. Most states will take the position that once a foreign corporation has registered in a state, they have agreed to be subject to the state's laws.

States that have special jurisdiction over a charity.

Where the question gets more difficult to answer is when trying to decide which states have "special jurisdiction" over an organization. This is an area of law that developed in the pre-Internet age, where courts had to figure out how much contact with a state is enough to make it fair that a corporation could be subjected to a state's laws. As those laws developed, there were two legal issues that interacted with each other. First, there is a general notion that fairness, reflected in the United States Constitution's "Due Process" clause, requires that people should not be able to be sued in a place where they have less than minimal contact. Imagine that "Adam" is sitting in a coffee shop in Florida and whispers something scandalous to "Betty" about California resident "Chloe." Should Chloe be allowed to sue Adam for defamation in California courts and make him fly to California to defend the lawsuit? Probably not. But the second legal issue is the idea of a "long arm" jurisdiction: in some cases it should be fair for Chloe to sue Adam in California. For example, what if Adam (still in Florida) phones all of Chloe's friends in California to gather scandalous information about her, and then publishes a pamphlet about her which he mails to all of Chloe's neighbors? States like California would like to say that these types of connections between Adam's conduct and the State of California should give the state the ability to exert jurisdiction over Adam.

There is no single answer to the question of how these legal principles play out in the age of the Internet. There have been some cases where courts have tried to come up with rules, but this is an area that is still developing. The question of whether a "donate now" button on a charity's website is enough to create long arm jurisdiction is not yet consistently answered one way or the other. Several courts have said, "yes." Several have said, "no."

Whether the state in question even exerts that it has jurisdiction over a "donate now" button.

Finally, the question of whether a "donate now" button would be a something that a state would consider to trigger a reporting requirement varies from state to state.

Example: In Colorado, the state has adopted the Charleston Principles. Those principles say that a state should refrain from making every out-of-state charity register in every other state unless the charity's connections to the state are specificallty directed at a state or reach a certain threshold. As defined in Colorado, those principles exempts a charity unless it "specifically targets persons physically located in Colorado for solicitation," or when it "receives contributions from Colorado on a repeated and ongoing or substantial basis" through its website. "Repeated and ongoing" is defined as 50 or more donations in a fiscal year, and "substantial" is the lesser of $25,000 or 1% of website donations. Under Colorado's rules, if a charity in California has a "donate now" button, only 15 people in Colorado make a donation through that button, and the charity only receives a small amount of money from those donations, it does not have to register in Colorado. If however, the charity were to run an ad campaign on social media directed at people in Colorado, driving those Colorado residents to the website and the "donate now" button, it does not matter how few or small the donations are. Colorado would assert that its charitable solicitation law now applies. And, while the law is uncertain, it is highly likely that any court would agree that the act of intentionally targeting Colorado residents would subject the California charity to the special jurisdiction of Colorado.

While Colorado is one of only a few states to have explicitly adopted the Charleston Principles, there are other ways that state-by-state review of laws might help provide clarity. As another example, Alabama requires registration for "every charitable organization, except those granted an exemption ... which ... intends to solicit contributions in or from this state." So, while this is not as clear as Colorado's adoption of the Charleston Principles, it does allow that out-of-state charities that do not "intend to solicit" from Alabama need not register. It is not clear in these circumstances what it would take to show that a charity "intends" to solicit, but an argument can certainly be made that a simple "donate now" button on a website (that is not targeted into Alabama) is not intended to solicit from Alabama.