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Raising Money in Maine? Important Legal Updates

by Molly O'Connell

Chances are your nonprofit is starting, ending or in the middle of a fundraising campaign, so be sure you are aware of new charitable solicitation rules that go into effect on October 9th.

To help you get up to speed on the new rules as well as refresh your memory about ones that are staying the same, our 007: Licensed to Fundraise webinar recording is available on demand. Additionally, Friend of MANP, Rob Levin, did a great summary of the changes in his recent e-bulletin, reprinted below, and you can read our (recently updated) white paper on fundraising and charitable solicitation.

And of course legal compliance is just the beginning. Brush up your fundraising skills for the year ahead through one (or more!) of the terrific fundraising SkillBuilders available on MANP’s schedule this fall, covering topics from email fundraising to grantwriting.

Maine Charitable Solicitation Act Changes

Re-printed with permission from “Maine Nonprofit Law E-Bulletin, July 2103″ by  Robert H. Levin – Attorney at Law

One bill that did not fall prey to the Governor’s veto pen was L.D. 1277, An Act To Streamline the Charitable Solicitations Act.”  This bill was passed by the Legislature and signed into law by the Governor as 2013 P.L. Ch. 313.  The original bill was spearheaded by the Department of Professional and Financial Regulation, and amendments were offered and accepted by the Maine Association of Nonprofits (MANP), with assistance from myself and Attorney Leonard Cole.

The final bill improves the Charitable Solicitations Act at the margins, although the Department rejected some MANP suggestions that would have been very helpful to the nonprofit community. 

The bill makes a number of useful changes to the Charitable Solicitations Act, 9 M.R.S. § 5001 et seq., most notably:

  • Expanded Exemption Threshold
    Until now, organizations that raised less than $10,000 in a calendar year or raised funds from 10 or fewer persons in a calendar year were exempt from registration and only had to file an annual exemption form, but only if fundraising activities were carried out by volunteers.  The amended Act expands the exemption thresholds to $35,000 or less or 35 or fewer persons.  In addition, it eliminates the volunteer-only requirement, although organizations that contract with a professional solicitor or professional fund-raising counsel still may not avail themselves of this exemption.
  • Expanded Exemption for Organizations That Solicit Primarily Within Their Membership
    Organizations whose fundraising activities are primarily aimed at its own members have long enjoyed an exemption from annual registration, but only if the fundraising activities were conducted by the members.  This meant that employees (unless they were also members) could not be involved in fundraising activities in order to maintain the exemption.  The Act is now changed to eliminate the member-only-participation language, although (as with the $35,000/35 person exemption) organizations that contract with a professional solicitor or professional fund-raising counsel still may not avail themselves of this exemption.
  • Eliminating Regulation of “Commercial Co-Venturers”
    For many years, for-profit businesses that conducted fundraisers for charities and raised more than $10,000 in a calendar year were required to register as “commercial co-venturers.”  Awareness of this requirement was spotty, and compliance was presumably very low.  This provision of the law will not be missed by anyone.
  • Reducing the Filing Requirements for Registration and Annual Renewal
    Charities registering for the first time and applying for an annual renewal of a charitable solicitation will enjoy slightly reduced filing requirements.  For example, a charity no longer needs to submit its written contracts with professional fundraisers.

MANP pushed for two other changes that did not make it into the final bill:

  1. Eliminating the need for exempt organizations to file an annual exemption form.  Most states that allow exemptions do not require an annual exemption filing, but just a one-time filing.  The Department apparently considers the annual filing useful to ensure continued compliance, but it seems to me to be a poor use of time and financial resources for the Department and small charitable organizations.
  2. Eliminating the requirement that an organization have already received federal tax-exempt status (e.g., 501(c)(3) recognition) from the IRS in order to obtain a license.  This requirement is very likely an unconstitutional prior restraint on the First Amendment’s right of free speech.  Because the law requires a license or an exemption in order to solicit, and because the IRS can often take many months to process an application for 501(c)(3) recognition, new nonprofits are in the uncomfortable position of either having to wait until they receive a 501(c)(3) determination letter, finding a fiscal sponsor, or else going ahead with fundraising upon the premise that the Department’s unconstitutional interpretation would be struck down if challenged in court.  Failing to rectify this problem was a true missed opportunity by the Department and the Legislature.

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