Nonprofit regulation in Connecticut

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Nonprofit regulation in Connecticut involves a complex set of rules that govern nonprofit organizations and charitable giving throughout the state. Major issues surrounding nonprofit regulation nationwide include the following:

• contribution limits,
• donor disclosure, and
• the redefinition of issue advocacy.

Connecticut is one of 39 states that require charitable organizations, and those intending to solicit on their behalf, to register with the state in order to solicit contributions, whether they are a Connecticut organization or based out-of-state. In Connecticut a number of groups and organizations are exempt from registration. Unlike many states, however, in which groups that receive less than $25,000 in a year are exempt, Connecticut exempts groups that receive less than $50,000. Organizations that are exempt must apply for exemption; it is not automatic.

Connecticut is one of 32 states that allows registrants to use either the Unified Registration Statement (URS) or the state registration form. Only seven states requiring registration do not accept the URS.

According to Guidestar, an organization that reports on nonprofit companies, regulation of nonprofit activity protects donors and organizations from potential fraud and helps "to maintain trust in the [nonprofit] sector." According to the London School of Economics, nonprofit disclosure requirements can create privacy concerns among potential donors, thereby having an unintended negative impact on donor participation.

Note: The following is not a how-to guide in managing an organization's registration and reporting requirements, but rather an attempt to share information about the relative degree of regulation governing nonprofit charitable activity at the individual state level. The information on this page was last updated in early 2015.

Background

IRS building in Washington, D.C.

According to the Foundation Center, there are over 1.5 million nonprofit organizations in the United States. Section 501 of the U.S. tax code outlines which types of nonprofit organizations may be granted tax exempt status by the Internal Revenue Service. The section of this code that provides for exemption is section 501(a), which states that organizations are exempt from some federal income taxes if they fall under sections 501(c) or 501(d), or under section 401(a).

Organizations classified as 501(c)(3) are nonprofit charitable, religious and educational organizations. These include organizations like the Red Cross and Habitat for Humanity as well as the American Civil Liberties Union and the Lucy Burns Institute, which provide, as defined in the federal code, “instruction of the public on subjects useful to the individual and beneficial to the community.” Organizations granted 501(c)(4) status are political education organizations, and can engage in political lobbying. This includes donations to political committees that support or oppose ballot measures, bond issues, recalls or referenda. 501(c)(4) organizations can thus engage in issue advocacy, but they are not allowed to expressly advocate for the election or defeat of a particular candidate.

While the Internal Revenue Service designates eligible nonprofit charitable organizations with a federal tax exempt status, individual states require their own level of regulation and reporting, particularly when organizations attempt to solicit fundraising contributions. The amount of regulation required differs by state, as does the degree to which state regulations protect the privacy of individual donors. Three states, for instance, require annual copies of IRS Form 990 (schedule B), which lists individual contributors who contribute over a specified amount. Research shows that attempts to make contributions more transparent has an unintended negative effect on the number of contributors who give, as well as the amount.

Governing agencies

The Connecticut Department of Consumer Protection is the agency in the state that oversees rules governing donor solicitation and registration.

See law: General Statutes of Connecticut sections 21a-175 through 21a-1901

Registration requirements

Seal of Connecticut

Any nonprofit group or organization located in Connecticut, unless exempt, must register with the Department of Consumer Protection. Any non-exempt nonprofit, in any state, intending to solicit in Connecticut must also register, along with anyone intending to solicit in Connecticut on behalf of a nonprofit. Non-exempt nonprofits might include traditional charitable organizations like the Red Cross or Habitat for Humanity, educational or policy organizations like the American Civil Liberties Union, or issue advocacy groups like the League of Conservation Voters.

Exemptions

A number of groups are exempt from registering in Connecticut. Any group, however, that meets the exemption requirements must apply for exemption by filing Form CPC-54, Claim of Exemption From Registration. Once approved, the exemption is permanent and need not be renewed unless required by the Department of Consumer Protection.

The following groups are exempt from registering:

• Organizations that intend to raise less than $50,000 in a given year, if they have only unpaid fundraising volunteers
• Religious organizations
• Parent-teacher associations
• Accredited educational institutions
• Nonprofit hospitals licensed in any state
• Government agencies
• Any person soliciting solely on behalf of groups described above

Procedures

Nonprofits registering in Connecticut can use the Unified Registration System (URS) form or the state form. The state form can be filed by mail or online.

Connecticut informally abides by the Charleston Principles, which mean that Connecticut-based groups with donate buttons on their websites must register. Out-of-state groups with similar buttons need not register unless they explicitly direct Connecticut residents to their sites in order to solicit funds.

Documents

The following documents are required along with a registration form:

• Completed IRS Form 990 (Organizations are reminded not to include a list of contributors as part of their Form 990, since that information will then be made part of the public record. Additionally, organizations that are exempt from filing a Form 990 for federal purposes must still do so for Connecticut)
• If the organization received more than $50,000, it must include an audit conducted by an independent public accountant.

Signature and fee

Two authorized signatures are required.

The registration fee is $50.

Filing procedures

Registration materials must be mailed to the following address:

Public Charities Unit
c/o Department of Consumer Protection
165 Capitol Avenue
Hartford, CT 06106

Renewal

Registration is valid for one year and must be renewed. Organizations can opt to use the Unified Registration System (URS) to renew or the state form, Charitable Organization Renewal Form, which is mailed to groups before the initial registration or renewal period ends. The state form is considered simpler than the URS, because it is only one page. In either event, forms must accompany the organization's most recent IRS Form 990. There is a $50 fee to renew.

Financial reporting

If an organization received over $500,000, then it must provide an audit conducted by a Certified Public Accountant.

Extensions

Extensions of six months are available for financial reporting as the renewal process, but must be requested via email.

Fee

There is no fee to file the annual financial report.

Recent news

This section links to a Google news search for the term "Connecticut + donor + privacy"

Connecticut Donor Privacy News Feed

See also

• Connecticut
• IRS code, section 501
• Nonprofit organization

External links

• Connecticut Department of Consumer Protection