On March 24, 2024, California approved final regulations governing charitable fundraising platforms and platform charities. These regulations implement Assembly Bill No. 488 (AB 488), an act that generally went into effect on January 1, 2023.
You can find the new regulations codified in Government Code Section 12599.9 here. This post, the first of two, will cover, very generally, the following regulations:
- Section 314 (definitions): effective March 26, 2024;
- Section 315 (registration and filing requirements): effective June 12, 2024;
- Section 316 (good standing of charities): effective March 26, 2024;
- Section 317 (solicitation disclosures): effective March 26, 2024;
- Section 318 (charity consent for solicitations): effective January 1, 2025;
- Section 319 (tax donation receipts): effective January 1, 2025;
Definitions from the Government Code
Charitable fundraising platforms (CFP)
Charitable fundraising platform means any person, corporation, unincorporated association or other legal entity that uses the internet to provide an internet website, service, or other platform to persons in this state, and performs, permits, or otherwise enables acts of solicitation to occur, which includes the following [five activities (the “Solicitation Types”)] and any similar activity:
(A) Lists or references by name one or more recipient charitable organizations to receive donations or grants of recommended donations made by donors who use the platform.
(B) Permits persons who use the platform to solicit donations for or recommend donations to be granted to one or more recipient charitable organizations through peer-to-peer charitable fundraising.
(C) Permits persons who use the platform to select one or more recipient charitable organizations to receive donations or grants of recommended donations made by a platform, platform charity, or other third party person, based on purchases made or other activity performed by persons who use the platform.
(D) Lists or references by name one or more recipient charitable organizations to receive donations or grants of recommended donations made by the platform based on purchases made or other activity performed by persons who use the platform.
(E) Provides to charitable organizations a customizable internet-based website, software as a service, or other platform that allows charitable organizations to solicit or receive donations on or through the platform, including through peer-to-peer charitable fundraising. The customizable platform provided by the charitable fundraising platform does not include the charitable organization’s own platform, but may integrate with the charitable organization’s platform.
Gov. Code Sec. 12599.9(a)(1)
Excluded from the definition of a CFP are: (A) a charitable organization’s own platform that solicits donations only for itself; (B) a vendor that solely provides technical or supportive services to a CFP so that the CFP can function and operate (including vendors used for hosting or domain services, security certificates, internet access, internet application development, or digital payment processing unless that vendor also performs, permits, or otherwise enables acts of solicitation described by any of the Solicitation Types above (or similar) on its own platform to persons in this state); and (C) a donor advised fund (DAF) sponsoring organization that (1) solicits donors to open DAF accounts or similar accounts, and (2) receives recommendations from donors on charitable organizations that may receive grants of funds previously contributed to the sponsoring organization for a donor’s DAF account, so long as the sponsoring organization does not list or reference by name one or more recipient charitable organizations for solicitation purposes on its platform for persons who are not donor advisors to a DAF of the sponsoring organization (i.e., generally, a DAF sponsoring organization is excluded from the requirements and obligations of a CFP if it does not solicit on its fundraising platform (e.g., website) to anyone other than the donor advisors (and presumably the donor themself)).
Further, a person or entity that meets the definition of both a charitable fundraising platform and either (1) a commercial fundraiser for charitable purposes or (2) a commercial coventurer must pay careful attention to a more limited application of being treated as a charitable fundraising platform.
Platform charities (PC)
“Platform charity” means a trustee as defined in Section 12582 or a charitable corporation as defined in Section 12582.1 that facilitates acts of solicitation on a charitable fundraising platform, which includes either of the following and any similar activity:
(A) Solicits donations through a charitable fundraising platform for itself from donors who use the charitable fundraising platform with the implied or express representation that the platform charity may grant donations to recipient charitable organizations.
(B) Grants funds to recipient charitable organizations based on purchases made or other activity performed by persons who use a charitable fundraising platform.
Gov. Code §12599.9(a)(5)
Notably, a PC excludes from its definition a DAF sponsoring organization that (1) solicits donors to open DAF accounts or similar accounts, and (2) receives recommendations from donors on charitable organizations that may receive grants of funds previously contributed to the sponsoring organization for a donor’s DAF account, so long as the sponsoring organization does not list or reference by name one or more recipient charitable organizations for solicitation purposes on its platform for persons who are not donor advisors to a DAF of the sponsoring organization (i.e., generally, a DAF sponsoring organization is excluded from the requirements and obligations of a PC if it does not solicit on its fundraising platform (e.g., website) to anyone other than the donor advisors (and presumably the donor themself)).
Definitions in the Regulations
- Conspicuous
- Digital payment processing fee
- Donated funds
- Fee
- May Not Operate or Solicit for Charitable Purposes List
- Misuse
- Partner
- Partnering platform
- Partnership
- Platform
- Platform user
- Registry Search Tool
- Solicitation type A
- Solicitation type B
- Solicitation type C
- Solicitation type D
- Solicitation type E
Registration and Filing Requirements (effective June 12, 2024)
As of the effective date, a CFP must register with the AG before soliciting, permitting, or otherwise enabling acts of solicitation. Those already engaged in such activities prior to the effective date must register by such date. The initial registration form is Form PL-1 and must be filed with a $625 registration fee. An annual registration renewal (Form PL-2) must be filed with the AG on or before January 15 for each calendar year that the CFP engages in or will engage in the CFP activities described in Section 315(b). A $625 registration fee will also be required with each renewal.
A PC must file registrations with the AG as required before these Regulations. In addition, as of the effective date, a PC that enters into a partnership with a CFP to facilitate acts of solicitation on that platform must file a notification of such partnership, Form PL-3 no later than 30 days after the partnership was entered.
A CFP or PC must file an annual fundraising report, Form PL-4, with the AG on or before July 15 of each year for fundraising activities of the preceding calendar year. There appears to be some leeway for keeping fee information confidential or a trade secret, subject to the AG’s discretion.
Before the effective date, the Registry of Charities and Fundraisers’ Online Filing Service will become available. The Online Filing Service will be the only way through which CFPs can register, and for CFPs or PCs to submit other filings. User accounts will be required. Visit this AG web page for more information as it becomes available, including answers to frequently asked questions.
Good Standing Requirements ( effective March 26, 2024)
A CFP or PC may only solicit, permit, or otherwise enable solicitations, or receive, control, or distribute funds from donations or recommended donations for charitable organizations in good standing with the Internal Revenue Service (IRS), the Franchise Tax Board (FTB), and the Attorney General (AG). A CFP or PC may hold or control funds from donations or recommended donations for charitable organizations not in good standing with the AG for the length of time it takes to determine an alternate to be sent the funds, consistent with the regulations, which differ depending on the Solicitation Type and other factors (e.g., consenting vs. non-consenting recipient charitable organization (Recipient Charity), minimum threshold amounts).
Under the statute, “good standing” means that a PC, Recipient Charity (to receive donations or grants of recommended donations), or other charitable organization’s tax-exempt status has not been revoked by the IRS or FTB, or is not prohibited from soliciting or operating in the state by the AG. The regulations provide that a charitable organization on the May Not Operate or Solicit for Charitable Purposes List available here (“Noncompliant Orgs List”) is not in good standing with the AG. However, if a charitable organization is on the Noncompliant Orgs List but shown to be in good standing on the Registry Search Tool, a CFP or PC may solicit, permit, or otherwise enable solicitations for, or receive, hold, control, or send funds from donations or recommended donations to the charitable organization.
If a charitable organization is not on the Noncompliant Orgs List but shown to be not in good standing on the Registry Search Tool, a CFP or PC may solicit, permit, or otherwise enable solicitations for, or receive, hold, control, or send funds from donations or recommended donations to the charitable organization.
There are additional timing rules in Section 316 that will not be covered here but generally address the facts that the Noncompliant Orgs List is not updated daily (it appears that the Noncompliant Orgs List will be updated semi-monthly on the first and third Wednesdays of each month).
Solicitation Information ( effective March 26, 2024)
A CFP or PC that engages in solicitation type A or B (see CFP Solicitation Types above) must allow donors or persons engaging in peer-to-peer charitable fundraising (P2P Fundraising) an option to provide their name and contact information to a Recipient Charity unless (1) the Recipient Charity has not provided prior written consent for using its name or information in a solicitation or (2) its a P2P Fundraising solicitation where donated funds are sent to a person engaging in such solicitation.
A CFP or PC that engages in solicitation type A or B and allows donors or persons engaging in P2P Fundraising to restrict or designate a preference as to how donations or recommended donations may be used by a Recipient Charity, must, before donors can complete a donation, conspicuously disclose that the donated funds may be used by a Recipient Charity on an unrestricted basis, regardless of designations or restrictions made by donors or persons engaging in P2P Fundraising unless a Recipient Charity has provided prior written consent to use its name in a solicitation and has met certain other requirements described in Section 317(b).
A CFP or PC that engages in solicitation type B and allows donated funds to be sent to persons engaging in P2P Fundraising, must, before persons can create such a solicitation campaign, conspicuously disclose the following requirements unless the donations or recommended donations from such campaign are made to a PC or Recipient Charity:
[T]hese persons shall not divert or misuse the donated funds, and shall send the donated funds to the recipient charitable organization referenced in solicitations no later than 10 business days after receipt. Persons engaging in peer-to-peer charitable fundraising that fail to send donated funds to the recipient charitable organization no later than 10 days after receipt are required to register as trustees with the Attorney General pursuant to Government Code section 12585.
Unless the CFP or PC has no policy or standard under which a charitable organization’s receipt of the funds is precluded, a CFP or PC must disclose the most pertinent reasons under which a charitable organization may be deemed ineligible to be sent donated funds as described in Section 317(d).
A charitable fundraising platform or platform charity that engages in solicitation type C or D, must disclose the length of time it takes to send donated funds to a Recipient Charity, subject to any minimum threshold amount and as otherwise described in Section 317(e).
Recipient Charity Consent (effective January 1, 2025)
An agreement between a Recipient Charity and a CFP or PC, in which the Recipient Charity provides written consent for the CFP, PC, or any partnering platform expressly identified in that agreement to use its name in a solicitation on or through a CFP, must comply with all of the requirements in Section 318(a), including specifying the total amount of fees charged for each CFP or PC and providing for a Recipient Charity’s right to review and approve information in the solicitation about itself.
When a Recipient Charity makes a written request for its removal from the CFP’s or PC’s list or solicitation regarding Recipient Charity, the CFP or PC shall promptly verify the request no later than three business days after the written request for removal is made. If the Recipient Charity does not provide the identifying or other relevant information no later than three business days after it was asked, the CFP or PC shall use other information sources as specified in Government Code Section 12599.9(f)(2)(A) (e.g., AG Registry, IRS Form 990) to verify the request.
Donation Receipts (effective January 1, 2025)
A CFP or PC that engages in solicitation type A or B shall promptly send a tax donation receipt to donors after donations or recommended donations are made, no later than five business days after a donation is made.
When donations or recommended donations are made to a Recipient Charity, instead of to a PC or CFP that is tax-exempt under IRC Section 501(c)(3), the CFP shall obtain authorization from the Recipient Charity to send a tax donation receipt on behalf of the Recipient Charity.
Additional Resources
Charitable Fundraising Platforms (California Office of the Attorney General)
California Regulation of Charitable Fundraising Platforms Part 1 – Definitions; Part 2 – Reporting Due Diligence, Recordkeeping, and Disclosure Rules (EO Radio Show – Your Nonprofit Legal Resource, Farella Braun + Martel)