The law of fundraising

638 Pages·2013·7.169 MB·English

by  Bruce R Hopkins, Alicia Kirkpatrick

3GFFIRS 10/04/2013 0:24:53 Pagevi
3GFFIRS 10/04/2013 0:24:53 Pagei
The Law of Fundraising
Fifth Edition
3GFFIRS 10/04/2013 0:24:53 Page ii
’
Don t Miss Out on
Must-Have and Timely
New Information!
(cid:1) Keep up-to-date on relevant changes in IRS forms, requirements, and
related tax procedures.
(cid:1) Learn about state and federal rules impacting the responsibilities of
fundraising professionals, as well as compliance issues, prospective
laws, and regulatory trends.
(cid:1) Stay abreast of complicated legal and tax issues.
Subscribe now to make sure you have access to the latest information regarding
the law of private foundations.
Go to
www.nonprofitcommunity.com/index.php/nonprofit-accounting- finance/
and sign up today!
3GFFIRS 10/04/2013 0:24:53 Pageiii
The Law of Fundraising
Fifth Edition
Bruce R. Hopkins
Alicia M. Kirkpatrick
3GFFIRS 10/04/2013 0:24:53 Page iv
Cover image: Wiley
Cover design: # Comstock / Jupiter Images
Copyright # 2013 by Bruce R. Hopkins, Alicia M. Kirkpatrick. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or
by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted
under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission
of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright
Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, [phone], fax [phone], or on the
Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the
Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, [phone],
fax [phone], or online at http://www.wiley.com/go/permissions.
Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in
preparing this book, they make no representations or warranties with respect to the accuracy or
completeness of the contents of this book and speci fically disclaim any implied warranties of merchantability
or fitness for a particular purpose. No warranty may be created or extended by sales representatives or
written sales materials. The advice and strategies contained herein may not be suitable for your situation.
You should consult with a professional where appropriate. Neither the publisher nor author shall be liable
for any loss of profit or any other commercial damages, including but not limited to special, incidental,
consequential, or other damages.
For general information on our other products and services or for technical support, please contact our
Customer Care Department within the United States at [phone], outside the United States
at [phone] or fax [phone].
Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included
with standard print versions of this book may not be included in e-books or in print-on-demand. If this book
referstomediasuchasaCDorDVDthatisnotincludedintheversionyoupurchased,youmaydownload
this material at http://booksupport.wiley.com. For more information about Wiley products, visit
www.wiley.com.
LibraryofCongressCataloging-in-PublicationData:
Hopkins,BruceR.
Thelawoffundraising/BruceR.Hopkins,AliciaKirkpatrick.–FifthEdition.
pagescm
Includesindex.
ISBN978-1-118-65063-9(cloth/website);ISBN978-1-118-65064-6(ebk);ISBN978-1-118-65057-8(ebk)
1. Fundraising–Lawandlegislation–UnitedStates. 2. Charitableuses,trusts,andfoundations–United
States. I. Kirkpatrick,Alicia,1984- II. Title.
KF1389.5.H662013
346.730064–dc23
2013020316
PrintedintheUnitedStatesofAmerica.
10 9 8 7 6 5 4 3 2 1
3GFFIRS 10/04/2013 0:24:53 Pagev
Thisbookisdedicatedtoallinthe
charitablefundraisingprofession,
withtheadmonitionthatmessengers
arenottobeblamed.
3GFFIRS 10/04/2013 0:24:53 Pagevi
3GFTOC 09/30/2013 17:34:59 Pagevii
Contents
Preface xi
1 Government Regulation of Fundraising for Charity 1
§1.1 Charitable Sector and American Political Philosophy 2
§1.2 Charitable Fundraising: A Portrait 9
§1.3 Evolution of Government Regulation of Fundraising 10
§1.4 Contemporary Regulatory Climate 16
2 Anatomy of Charitable Fundraising 21
§2.1 Scope of Term Charitable Organization 22
§2.2 Methods of Fundraising 25
§2.3 Role of Fundraising Professional 36
§2.4 Role of Accountant 40
§2.5 Role of Lawyer 42
§2.6 Viewpoint of Regulators 43
§2.7 Viewpoint of a Regulated Professional 44
§2.8 Coping with Regulation: A System for the
Fundraising Charity 46
3 States’ Charitable Solicitation Acts 49
§3.1 Summary 50
§3.2 Definitions 50
§3.3 Preapproval 60
§3.4 Annual Reporting 64
§3.5 Exemptions 65
§3.6 Regulation of Professional Fundraisers 72
§3.7 Regulation of Professional Solicitors 73
§3.8 Regulation of Commercial Coventurers 73
§3.9 Limitations on Fundraising Costs 74
§3.10 Availability of Records 76
§3.11 Contracts 77
§3.12 Registered Agent Requirements 78
§3.13 Prohibited Acts 78
§3.14 Regulatory Prohibitions 80
§3.15 Disclosure Statements and Legends 80
§3.16 Reciprocal Agreements 81
§3.17 Solicitation Notice Requirements 82
§3.18 Fiduciary Relationships 83
§3.19 Powers of Attorney General 83
& vii &
3GFTOC 09/30/2013 17:34:59 Pageviii
CONTENTS
§3.20 Miscellaneous Provisions 84
§3.21 Sanctions 85
§3.22 Unified Registration 85
§3.23 Other Laws 86
§3.24 Prospect of Law Changes 88
4 State Regulation of Fundraising 91
§4.1 Regulation of Fundraising Costs 92
§4.2 Police Power 114
§4.3 Fundraising as Free Speech 120
§4.4 Due Process Rights 164
§4.5 Equal Protection Rights 166
§4.6 Delegation of Legislative Authority 170
§4.7 Treatment of Religious Organizations 175
§4.8 Other Constitutional Law Issues 186
§4.9 Exemption for Membership Groups 187
§4.10 Defining Professional Fundraiser and Professional Solicitor 189
§4.11 Direct-Mail Fundraising Guidelines 191
§4.12 Registration Fees 195
§4.13 Fundraising Over Internet 198
§4.14 Conclusions 210
5 Federal Regulation of Fundraising 211
§5.1 Federal Regulation of Fundraising: How It All Began 213
§5.2 Fundraising Disclosure by Charitable Organizations 221
§5.3 Charitable Gift Substantiation Requirements 225
§5.4 Quid Pro Quo Contribution Rules 233
§5.5 Fundraising Disclosure by Noncharitable Organizations 237
§5.6 Intermediate Sanctions 241
§5.7 Unrelated Business Rules 252
§5.8 Exemption Application Process 293
§5.9 Reporting Requirements 301
§5.10 Lobbying Restrictions 301
§5.11 Public Charity Classifications 305
§5.12 School Record-Retention Requirements 311
§5.13 Fundraising Compensation Arrangements 313
§5.14 Charitable Deduction Rules 320
§5.15 Commensurate Test 346
§5.16 Special Events and Corporate Sponsorships 352
§5.17 Appraisers and Penalties 356
§5.18 Postal Laws 358
§5.19 Antitrust Laws 371
§5.20 Securities Laws 372
§5.21 FTC Telemarketing Rules 375
§5.22 Internet Communications 381
& viii &