Crowdfunding. Ah, the promise of raising a lot of cash by simply posting a request. What tax-exempt organization would not want to jump on the crowdfunding bandwagon? Think of the success stories. Individuals who have raised thousands of dollars for silly reasons, like making potato salad. That is right, potato salad. However, when informally polling tax-exempt organizations at a recent speaking engagement, I was surprised to find out that substantially all of the tax-exempt organizations in the audience did not engage in any crowdfunding. How can this be?
It turns out that crowdfunding may not make sense for certain tax-exempt organizations for a number of reasons. First, crowdfunding takes time. A lot of time. Think of the time involved with picking the appropriate crowdfunding website, researching the policies of such website, determining the appropriate project for funding and the goal, posting content to such website, checking the accounting related to receipts from that website, reviewing donor information from such website, and updating content on such website. If your tax-exempt organization does not have the time to dedicate to crowdfunding, you may consider concentrating on more traditional fundraising methods.
Second, crowdfunding raises certain legal issues. Depending on the circumstances, your online fundraising could require you to register in other states under charitable solicitation laws. You need to ensure that you have protected your intellectual property before you post it online. You need to provide accurate information about your organization and avoid misrepresentations. You need to ensure that your donor information is protected and that your donors receive receipts or appropriate acknowledgements of their donations so they can support the deductibility of their donations. You have to be prepared to deal with these issues if you want to participate in the crowdfunding craze.
Notwithstanding the foregoing, some taxexempt organizations have jumped into crowdfunding with great success. Crowdfunding allows you to reach more people. It also allows you to reach a younger audience. This can result in more donations. After all, your mission is likely more important and compelling than making potato salad.