California is leading the way in regulating certain online fundraising activities that have not historically (or explicitly) been addressed in states' charitable solicitation laws. As we wrote last fall, Governor Newsom signed into law Assembly Bill (AB) 488, which amended the Supervision of Trustees and Fundraisers for Charitable Purposes Act to regulate charitable fundraising platforms, platform charities, and persons or entities that use the internet to facilitate, permit, or solicit charitable contributions in California. Although the law's operative provisions will not go into effect until January 1, 2023, persons newly regulated by the Act now have proposed regulations to which they can react and respond.
Various types of online fundraising efforts for nonprofits, like customer round-up campaigns, charitable sweepstakes, and choose-a-charity fundraising options, have proliferated in recent years, despite lacking a clear regulatory framework to guide them. Although states' charitable solicitation laws have provided a general outline for compliance, in many cases online fundraisers and the nonprofits that contract with them have been left to assume some risk when attempting to conform their efforts to applicable legal requirements. Often online fundraisers' business models could not be categorized neatly as commercial coventurer, professional fundraiser, or fundraising consultant efforts, and the rules for charitable trustees may not always have directly applied. In other cases where businesses have supported hundreds of nonprofit organizations at a time, it might have been practically impossible to comply with the laws applicable to traditional fundraisers.
To date, and in the absence of definitive guidance, online giving platforms have gleaned best practices by learning from the lessons of others and consulting the Federal Trade Commission's nonbinding guidance. Now, though, at least one state will have a codified framework that online charitable fundraising platforms must follow to comply with charitable solicitation requirements. As enacted, AB 488 requires charitable fundraising platforms and platform charities to register with the California Attorney General's Registry of Charitable Trusts, satisfy certain reporting obligations, and publish disclosures in connection with their solicitation activities, among other requirements that we described in more detail in our previous alert.
The proposed regulations attempt to clarify how regulated charitable fundraising platforms and platform charities can satisfy their obligations. While the following is not an exhaustive overview of the scope and effect of the proposed regulations, consider:
The California Department of Justice will hold a public hearing, viewable online, on the proposed regulations on July 13, 2022 at 9 am PT. In addition, any person interested in submitting written comments may do so before 5 pm PT on July 12, 2022. More information on the status of the proposed regulations and how to submit comments is available here.
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In sum, the proposed regulations provide significant detail on what charitable fundraising platforms must do before operationalizing their online fundraising efforts and outline a host of post-donation compliance obligations, most of which must be completed according to specified timetables. While some of these obligations will be familiar to those who conduct online fundraising activities, many will be new considerations, especially to those who have grown accustomed to what have traditionally been viewed as easier-to-implement customer donation programs (round-up campaigns, add a donation to check-out options, etc.).
If your organization is interested in submitting comments on the proposed regulations, or if you have questions concerning how the proposed regulations might affect your organization (including whether your activities might qualify your organization as a charitable fundraising platform or platform charity), please reach out to the authors, and we would be happy to help.
To learn more about California's proposed regulations affecting charitable fundraising platforms, and other topics like prize promotions, corporative giving, cause-related marketing campaigns, and the latest regulatory activity in this area, join our webinar, Evolving Trends in Cause-Related Marketing: Keeping Your Company in Compliance, on June 23.
 Proposed Regulations Regarding Administrative Enforcement of the Supervision of Trustees and Fundraisers for Charitable Purposes Act (proposed May 27, 2022), https://oag.ca.gov/system/files/media/pf-text-of-proposed-regulations.pdf [hereinafter Proposed Regulations] (to be codified at Cal. Code Regs. tit. 11, §§ 300–46, if adopted), § 314(a), (i), (g), (d), (c) (corresponding to Cal. Gov't. Code §§ 12599.9(a)(1)(A), (B), (C), (D), and (E), respectively).
 Proposed Regulations, § 314(b).
 Proposed Regulations, § 317.
 Proposed Regulations, § 320.
 Proposed Regulations, § 319.
 Proposed Regulations, § 322.
 Proposed Regulations, § 321.
 Compare this to a commercial coventurer’s obligation to provide the charity that benefits from its charitable sales promotion with an accounting sufficient to “determine that representations made to the public on its behalf have been adhered to accurately and completely.” Cal. Gov’t. Code § 12599.2(b)(3).
 Proposed Regulations, § 316.