Posted on May 23, 2023
Fundraising on Facebook: A Warning to Nonprofits
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Affinity Fundraising Registration has recently discovered that, in an effort to cover their own liabilities, Facebook has inadvertently made fundraising compliance in California harder and more expensive than it used to be, and moreover, nonprofits trying to do the right thing are essentially now being penalized for doing so. How did this happen? Great question. See below for a breakdown on what exactly is happening now and why.
If you are reading this you already know that fundraising is an integral means of promoting awareness and generating funds for nonprofits. The evolution of technology and an increasing reliance on digital media means many nonprofits are turning to social media channels and other third-party fundraising platforms as a way to significantly expand their reach.
Traditionally, online fundraising platforms haven’t been subject to the same registration and reporting requirements that are mandated for nonprofits and paid fundraising consultants. What was once a simpler way to reach millions of people with the click of a button is starting to change now that CA is the first state to implement new laws aimed at leveling the playing field and closing regulatory gaps.
New CA Law Targets Third-Party Fundraising Platforms
Effective January 1, 2023, charitable fundraising platforms and the charities who partner with them must now follow the new statutes set forth by the CA Assembly Bill No. 488 if they are going to make a charitable appeal within the state of CA.
The bill broadly defines a charitable fundraising platform as a legal entity that uses the internet to “provide a website, service, or other platform to persons in this state, and perform, permit, or otherwise enable certain acts of solicitation to occur.” According to this definition, third-party platforms such as Facebook, GoFundMe, Blackbaud, and CrowdRise, along with the nonprofits who use them, are required to register with the Attorney General’s Registry of Charitable Trusts and provide detailed information about solicitations and their recipients.
In addition to fulfilling reporting obligations, nonprofits and fundraising platforms must both meet additional requirements in order to legally solicit funds within the state of CA such as:
- Be in “good standing” with the IRS, CA Franchise Tax Board, and/or the CA Attorney General.1
- Charitable contributions must also be held in a unique account separate from other funds.
- Donations have to be promptly distributed to recipient charities.
Third-Party Fundraising Platforms Try to Enforce the Law
CA is the largest state economy in the United States, and to ensure compliance with the new statute, Facebook and Blackbaud (presumably others as well) understandably began taking action. According to nonprofits utilizing Affinity’s registration services, Facebook has reached out directly to some organizations, though for many others, it appears they are simply looking up the nonprofits registration status on the CA Registry of Charitable Trusts website and then determining if they can utilize the fundraising platform.
Unfortunately, many nonprofits were showing up as delinquent in their CA filing status, despite having submitted all required documentation for registration. The CA Attorney General’s (AG) online database identified many slow-processed registrations as “delinquent” when they were actually submitted and pending review before the state could change the status to “current.” Further investigation revealed a pre-existing backlog of applications at the CA AG’s Registry of Charitable Trusts of anywhere from 6 weeks to several months. Additionally, processing times lengthened during fall/winter 2022-2023, as more organizations rushed to get registered and/or renew their registrations sooner, during year-end giving season.
It’s been a real pickle!
- Facebook wants to stay compliant with the laws of the largest state economy in the US
- Facebook assesses non-profit compliance based on the current status on the CA Attorney General’s Registry of Charitable Trusts
- “Delinquent” status on the Registry’s database applies to many organizations but doesn’t tell a complete picture of an organization’s filing pending or not being in “good standing.”
- Facebook denies access to Facebook’s Fundraising Tools entirely until the nonprofits are compliant in the state of CA
To make matters more complex and expensive, a second issue arose when there was confusion within Facebook’s nonprofit support division regarding registration requirements that stemmed from confusing language in the laws.
Nonprofit organizations wishing to use Facebook’s Fundraising Tools that were found to be “delinquent” were reportedly told that they must also register with two additional offices: the CA Secretary of State and the CA Franchise Tax Board.
For most organizations, this simply isn’t true.2 A charity only needs to register with the Secretary of State and the Franchise Tax Board if they conduct business on CA soil. Therefore, requiring any charity that wanted to solicit funds on Facebook to register with two, if not all three, of these regulatory agencies in CA was far more oversight and regulation than was required. Ultimately, because Facebook was unfamiliar with the specifics of CA fundraising registration requirements, they ended up accidentally motivating many nonprofits to over-register in the state.
When CA announced a new law targeted at online fundraising platforms, the intent was to provide consistency and clarity while safeguarding donations received on the internet. However, by putting third-party platforms like Facebook in the position of regulating their users on behalf of the state, their inexperienced and understaffed support teams made the entire process more difficult than it needed to be and ultimately restricted many nonprofits’ ability to fundraise.
Layoffs of Facebook’s workforce in January 2023 likely didn’t help the situation either. Organizations were given wrong information, unfairly denied access, or ended up investing unnecessary time and resources because they were led to believe they had to register with multiple entities.
Facebook is still a valuable tool when it comes to reaching a large audience and expanding fundraising efforts. These are uncharted waters in a lot of ways, and the best way through them is to understand the potential for complications ahead and brace your non-profit accordingly. Problems like these can be avoided if you know who to trust and you don’t assume that a third-party platform that has neither the experience nor the expertise to deal with state-specific fundraising registration requirements will know how to best guide you. They might be able to answer your questions or provide direction, but if they don’t register nonprofits professionally, be cautious of the accuracy of the information you’re receiving.
Get the Support You Need to Fundraise with Confidence
The best way to safeguard yourself and streamline the fundraising registration process – especially if you’re going to be working with a third-party fundraising platform, like Facebook – is to arm yourself with information by seeking advice from experienced registration experts, and their reliable online resources. Just keep in mind that there’s a lot of conflicting information on the internet.
Remember, if you’re going to be soliciting funds in multiple states, be prepared for the time commitment required to learn about and fulfill state-specific registration nuances.
Another option is to work with a reputable fundraising registration provider who has the knowledge and experience necessary to help you navigate the registration process with confidence. At Affinity Fundraising Registration, we help nonprofits of every size from all across the nation. We offer a variety of support levels to align with your unique needs and we can help you navigate the complicated registration process so that your charity can raise funds legally in any state. Whether you’re looking for a full support solution or prefer a do-it-yourself option, we can take the hassle out of fundraising registration so you have more time to focus on achieving your goals.
To learn more, or to request a free estimate, please fill out our online form.