The Internet has rendered the obstacles of distance irrelevant by providing unprecedented access to knowledge, information and commercial opportunities on a global basis. For nonprofits this has offered fantastic opportunities to communicate with donors. Organizations can share their exciting programs and achievements through wonderful pictures and information on their Web site or e-mail newsletters. Whether you hold the position that the ‘Net is the best thing since sliced bread, or the worst evil since telemarketing, the genie is already out of the bottle—and all change presents varying degrees of risk and opportunity.
Describing itself as a “forum for the exchange of views and experiences relating to charitable trusts and charitable solicitation issues,” the National Association of State Charity Officials (NASCO) has been studying the new challenges posed to state regulatory agencies by the advent of charitable solicitation via the Internet. Currently 39 states require formal registration of nonprofits desiring to raise money within the state, providing information that will assure donor confidence in the charity and facilitate law enforcement. However, the dramatic increase in Web-based solicitation activity poses a number of thorny questions related to state jurisdiction and compliance for lawmakers and nonprofits alike.
“We want to protect the Internet for philanthropy and recognize that the Internet has lowered the barriers for potential fraud and abuse with respect to charitable solicitations. We understand how easy it is to put up a low-cost Web site from our own experience,” says Daniel Moore, current president of NASCO. Nevertheless, Moore notes that the Internet hasn’t changed the fundamental dynamics of the philanthropic relationship, or the questions that charities always have to answer for prospective donors: what is your mission, what are you doing with my donation, and can I trust you to take my money and do what you’ve promised with it?
NASCO began in 1999 to consider what was happening on the Internet and see how courts deal with jurisdiction over Web sites. “Fundamentally the question we needed to answer was if a charity has a Web site that accepts donations, are they soliciting in every state and therefore must they register in every state?” Simply stated, because the Internet doesn’t recognize state borders, a nonprofit in, say, Texas can solicit money from anyone possessing a computer and a modem.
NASCO wanted to offer guidance to state attorneys-general and have done so through the Charleston Principles–named for the city hosting the initial dialogue between nonprofit leaders and state charity officials. “We determined that simply having a Web site that offers the ability to make a contribution does not require a charity to register. For instance, if a charity exists in Texas and their only contact with New Mexico is through the Internet, NASCO advises that charity officials should not try to enforce the registration requirements on that charity.”
The shift from passive exposition to active solicitation usually triggers the registration requirement–and raises the dilemma of jurisdiction. “Now if that charity targets New Mexico for donors using their Web site, buys ads, and intentionally sends e-mail into New Mexico, then they are actively soliciting New Mexicans from Texas. NASCO recommends, if a charity is soliciting on a repeated, ongoing or substantial basis through their Internet activities in another state then the charity should register.” This routinely occurs in the non-electronic world of direct mail and telephone solicitations.
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Available on Nasconet, an interactive Web site dedicated to further study, analysis and discussion among state charity officials and nonprofit leaders, the Charleston Principles–a six-page document–provides a framework for understanding how states might best protect the public’s interest in the constantly shifting terrain of philanthropic activity in cyberspace. In Moore’s mind what is most important about the Principles is the belief “that the Internet is helpful to philanthropy and is changing the way philanthropy works.”
NASCO’s board will consider approving the principles this spring and subsequently transmitting the voluntary guidelines to the individual states for their consideration and possible adoption.
The Internet will also play a significant role in the area of increasing transparency and nonprofit accountability. NASCO is exploring a number of parallel projects with the IRS and Guidestar to add more depth and ease of access to charitable registration and reporting data currently available online.
“The Internet is transforming how philanthropy is working, but what it has yet to accomplish is the transformation of how state charity officials regulate charitable activities,” Moore observes. “We’re looking at the Internet to figure out how we can harness this new tool to change how we do our business.”
Daniel Moore is the registrar of charitable organizations in the New Mexico attorney general’s office.