Over the last few of months, the Tennessee Department of State, Division of Charitable Solicitations and Gaming (the “Division”) has filed at least seven lawsuits against non-profit organizations doing business in Tennessee.[1]  According to the complaints, each non-profit solicited contributions in Tennessee without registering with the Division as required by Tennessee’s Charitable Solicitations Act.[2]

Registration Requirements.

Under Act, non-profits who solicit funds must register on forms provided by the Division.[3]  The forms can be found at http://tn.gov/sos/charity/chforms.htm or completed online at https://sgssos.tn.gov/NewRegistration.aspx.  Among the information required is:

  • The name of the organization and the purpose for which it was organized;
  • The principal address of the organization and the address of any offices in this state. If the organization does not maintain an office, the name and address of the person having custody of its financial records;
  • The names and addresses of any chapters, branches or affiliates in this state;
  • The place where, and the date when, the organization was legally established, the form of its organization, and a reference to any determination of its tax exempt status under the Internal Revenue Code, compiled in 26 U.S.C.;
  • The names and addresses of the officers, directors, trustees and the principal salaried executive staff officer;
  1. A statement as to whether the organization intends to solicit contributions from the public directly or have such done on its behalf by others and submit a true copy of any contract or agreement with any professional solicitor, fundraising counsel, or any other person who is directly or indirectly involved with the solicitation of contributions;
  2. A statement as to whether the organization is authorized by any other governmental authority to solicit contributions and whether it is or has ever been enjoined by any court from soliciting contributions;
  3. The general purpose or purposes for which the contributions to be solicited shall be used;
  4. The name or names under which it intends to solicit contributions;
  5. The names of the individuals or officers of the organization who will have final responsibility for the custody of the contributions;
  6. The names of the individuals or officers of the organization responsible for the final distribution of the contributions; and
  7. A statement as to whether any officer, director, manager, operator, or principal of the charitable organization has been the subject of an injunction, judgment, or administrative order or has been convicted of a felony.[4]

In addition to the initial registration, non-profits must also file an annual renewal registration, which can completed on paper forms or online at https://sgssos.tn.gov/.  The information required in the renewal registration includes, among other things:

  1. A copy of a financial statement on forms approved by the secretary of state. Such report shall also specifically identify the amount of funds raised and all costs and expenses incidental thereto, all publicity costs, and costs of allocation or disbursement of funds raised. This report shall be signed by at least two (2) authorized officers of the organization, one of whom shall be the chief fiscal officer. Such officers shall certify that such report is true and correct to the best of their knowledge;
  2. Other information as required by the secretary of state; and
  3. For every charitable organization which received in excess of five hundred thousand dollars ($500,000) in gross revenue during the most recently completed fiscal year shall, the annual report shall be accompanied by:
    1. An audited financial statement; and
    2. All forms required to be filed by a charitable organization with the United States internal revenue service.[5]

Exemptions from Registration.

The following types of non-profits are exempted from the registration requirements.  However, they must apply to be exempt which must be renewed annually.

  • Bona fide religious institutions, educational institutions, or cooperative scholarship corporations;
  1. A charitable organization which does not intend to solicit and receive and does not actually raise or receive gross contributions in excess of $30,000;
  2. Volunteer fire departments, rescue squads or local civil defense organizations;
  3. Community fairs, county fairs, district fairs and division fairs;
  4. Political parties, candidates for federal or state office, and political action committees required to file financial information with federal or state election commissions;
  5. Hospitals and nursing homes that are subject to regulation by the Tennessee department of health; and
  6. Any corporation established by an act of congress of the United States that is required by federal law to submit annual reports of its activities to congress containing itemized accounts of all receipts and expenditures after being fully audited by the department of defense.[6]

The application for exemption and renewal forms can be found http://tn.gov/sos/charity/chforms.htm, or completed online at https://sgssos.tn.gov/Exemption.aspx.

Penalties.

Failure to comply with the registration or application for exemption requirements can result in significant fines for the charitable organization.[7]  Fines in the cases recently filed by the Division range from $2,500 to $12,500 plus interest and court costs.