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Nonprofit Fund Raising : an introduction to the legal issues


The law surrounding nonprofit fund raising is complex, particularly if your nonprofit fund raising organization has an international dimension. This page discusses some of the issues most likely to worry nonprofit fund raisers. However, it is just an introduction, and by no means answers all your questions.

The information on this page is from a United States perspective.


Could my nonprofit organization be a charitable trust?

For your nonprofit fund raising organization to be a charitable trust, its aims must be to serve charitable purposes (public or private) only. Charitable trusts are usually either non-profit organizations or government-registered organizations.

Government-registered organizations will have to account for their activities to the government. Nonprofit charitable organizations are usually required by law to be registered. The Attorney General of your state maintains the registry of charitable organizations in that state. However, religious organizations are often exempt from the requirement to register.

Tax deductibility

Donations to charities can be counted as deductible for income tax purposes as long as the charity is classed as tax-exempt by the Internal Revenue Service (IRS). Click here to go to the IRS website. Tax-exempt status for your organization means that US taxpayers who donate money to your organization will be able to reclaim the tax they have already paid on that money. This is obviously a valuable incentive for donors. The tax law applicable to your organization varies depending on whether you are a private or a public charity.

Storing data for nonprofit fund raising projects

Storing and using contributor information is very important for a long-term fund raising project . However, you should be aware of how the law stands when you store other people's personal data. The situation in the United States is confusing. The US Constitution does not explicitly mention privacy rights. However, Supreme Court rulings have created some privacy rights based on the Fourth and Fourteenth Amendments. However, these rights only prevent the Government from invading people's privacy, and do not explicitly apply to private companies or charities.

When dealing with other countries, you will have to be aware of their data protection laws on a country-by-country basis. For countries in the European Union, the law imposes restrictions on the transfer of data outside the European Economic Area. The EU data directive requires that countries outside the European Union, such as the United States , should "ensure an adequate level of protection" for data before personal information can be transferred to that country. However, there are exceptions to this rule, for example if the subject of the data has given unambiguous consent to the transfer of the data. See chapter four, articles 25 and 26, of directive 95/46/EC, for more information.

In the future, US law relating to privacy may change, as the European Commission has expressed concern that the direct marketing industry in the United States does not conform to the same requirements as the direct marketing industry in the European Union. However, even if the law on this does change in the US , it is not certain whether or not the new law will apply to nonprofit fund raising.

Nonprofit fund raising phone calls and the law

The Telephone Consumer Protection Act (1991) places restrictions on telephone solicitations. However, the Act exempts calls that are not made for a commercial purpose, and calls from tax-exempt nonprofit organizations.