NY Toughens Nonprofit Fundraising Law
The changes took effect Aug. 1, but many charities may be unaware of them since compliance is not required until they register again with the state, an annual process that varies by organization.
"The bottom line is the New York charitable registration law, which was bad to start with, was amended effective Aug. 1, and the amendment made a bad law worse," said Mark Fitzgibbons, president of operations and general counsel at American Target Advertising Inc., Manassas, VA.
Most of the 42 states with some type of charitable solicitation law spell out what organizations need to provide to obtain a license, he said, but New York leaves that to the discretion of the attorney general.
One amendment prohibits charities from using a New York return address unless the organization has an office at that address or divulges that the address is only a mail drop. Another attorney stressed the significance of that rule.
"One of the most controversial things is that if the solicitation uses a New York address that is not the address of the charitable organization, then they have to put the name of whomever the address belongs to on the envelope," said attorney Errol Copilevitz of Copilevitz & Canter, Kansas City, MO, whose firm does state registrations and filing for more than 200 national charitable organizations.
That disclosure interferes with the message of the charitable organization, he said, and it does little to protect consumers since fundraising vendors already must be registered in New York to contract with nonprofits.
One agency working with several well-known national organizations such as the Red Cross and Salvation Army said the amendment probably would be a bigger issue for its clients than itself.
"From an agency perspective, there doesn't appear to be anything unusual here," said Chip Grizzard, president of Atlanta-based Grizzard. "For nonprofits, however, the language and interpretation is more vague."
Though the amended New York law may not be much stricter than laws in other states, regulations have become increasingly complex, Copilevitz said.
"New York state seems to change its requirements fairly regularly," he said. "The degree of uniformity between states is not growing. If anything, it's getting further and further apart as states continue to add more requirements on a state-by-state basis."
Along with increased requirements, Fitzgibbons said, penalties have been made stricter in New York. A new provision specifies that errors in forms and reports that charities must file to register in New York can be construed by the attorney general's office as perjury.
"Under the law, the attorney general is made the investigator, the prosecutor, the witness and the judge against any alleged violators of the law," Fitzgibbons said.
However, it is unclear whether the attorney general will scrutinize minor violations.
"There's been absolutely no enforcement to date," Copilevitz said.
A spokesman for New York attorney general Eliot Spitzer said the changes were made to further protect consumers against fraud.