A charitable organization] or charity is a non-profit organization (NPO) whose primary objectives are philanthropy and social well-being (e.g. charitable, educational, religious, or other activities serving the public interest or common good).
The legal definition of a charitable organization (and of charity) varies between countries and in some instances regions of the country. The regulation, the tax treatment, and the way in which charity law affects charitable organizations also vary. Charitable organizations may not use any of its funds to profit individual persons or entities. (Wikipedia)
Last year, Americans donated more than $428 billion to 1.4 million public charities, religious groups and other nonprofits, according to Giving USA. But what makes a nonprofit organization a charity? Under the Internal Revenue Code (IRC), there are 25 different categories of nonprofit organizations. One of these categories, 501(c)(3), is described as a charitable organization, to which donations made are tax-deductible on the donor’s income tax return. Under the federal tax law definition and to qualify for tax-exempt charitable status, the organization must be organized and operated solely for an “exempt” purpose. Exempt purposes are religious, scientific, charitable, testing for public safety, education, literacy, fostering national and international sports competition, or the prevention of cruelty to children and animals. Federal tax law also requires that there be no improper private benefit to anyone in control of the charitable organization and that the charity not engage in political lobbying activities.
While, federal tax law has a substantial effect on most charities by maintaining their exemption from taxation and the deductibility of their donors’ contributions, state law is what regulates much of charities’ internal affairs and defines the obligations of their leaders.
Your State Attorney General’s Role in Charitable Regulations
The duty of a state Attorney General is to enforce the laws regulating charitable organizations, and to ensure the proper administration of funds dedicated to charitable purposes. An Attorney General’s supervisory authority over charities is rooted in the common law of charitable trusts and corporations, as well as the power of each state to protect the interest of the public in assets pledged to public purposes. Every state regulates charitable organizations in some fashion, which varies in scope and content. Regulation may be through registration requirements for charities, professional solicitors or professional fundraisers. It may also take the form of civil and criminal sanctions.
For instance, some states provide for exemptions from the initial and annual registration requirements for certain charitable organizations, but even these types of exemptions are not uniform among the states. As a general rule, churches are exempt from the registration requirement. Schools or hospitals may be exempt in some states, while many states require registration. Under the Maryland Solicitations Act, organizations must file a request to qualify for the exemption, while other states provide for an automatic exemption.
Generally, charities planning to solicit charitable contributions within a particular state must register with the appropriate state regulatory authority. At least 38 states have statutes that require charitable trusts, including private foundations, to register and file periodic financial reports. Some of these jurisdictions require registration and reporting with the Attorney General while the other jurisdictions require registration and reporting with another government agency.
All states have authority to investigate alleged charity violations; however, some have larger staffs and more resources to do so than others. As stated above, some states impose both civil and criminal sanctions, while others impose only one or the other. Civil remedies generally include suspension of the right to solicit in the state, injunction against specific conduct, civil penalties, and restitution. For example, Missouri Attorney General Jay Nixon charged a defendant with five counts of unlawful merchandising practices, following allegations that he defrauded several individuals through false solicitations for well-known charities that serve children. In Missouri, a charge of unlawful merchandising practices is a class D felony and punishable by up to four years in prison and a $5,000 fine. (Source – National Association of Attorney Generals)
Charity fraud is the act of using deception to get money from people who believe they are making donations to charities. Often a person or a group of people will make material representations that they are a charity or part of a charity and ask prospective donors for contributions to the non-existent charity. (Source – Wikipedia) Charity scams are sadly common; after high-profile disasters, there are often reports of fraudulent charities seeking to take advantage of those who want to help. The National Center for Disaster Fraud received more than 400 complaints of fraud after Hurricanes Harvey and Irma last year. And in the recent wake of Hurricanes Florence and Michael, donors should remain vigilant about this type of fraud. (Source – Federal Bureau of Investigation)
Again Americans contributed nearly $428 billion to charity in 2018, according to the Giving USA Foundation’s annual report on U.S. philanthropy. That generosity supports many amazing organizations that put those billions to work for health care, education, environmental protection, the arts and numerous other causes. Unfortunately, it also opens a door for scammers, who capitalize on donors’ goodwill to line their pockets.
Many such frauds involve faux fundraising for veterans and disaster relief; scammers know how readily we open our hearts and wallets to those who served and those rebuilding their lives after hurricanes, earthquakes or wildfires. But charity scams come in all shapes and sizes, from grifts on social media and crowdfunding sites to massive national cons, like the network of bogus cancer charities the Federal Trade Commission (FTC) said cheated donors in every state out of $187 million before it was busted in 2015. (Source – AARP)
Sham charities succeed by mimicking the real thing. Like genuine nonprofits, they reach you via telemarketing, direct mail, email and door-to-door solicitations. They create well-designed websites with deceptive names. (As hurricanes churn toward landfall, for example, scammers snap up URLs featuring the storm’s name.) Some operate fully outside the law; others are in fact registered nonprofits but devote little of the money they raise to the programs they promote.
Charity scammers are especially active during the holidays, the biggest giving season of the year. But with a little research and a few precautions, you can help ensure your donations go to organizations that are genuinely serving others, not helping themselves. (Source – AARP)
Well intending Americans are “hustled” out of millions of dollars annually by telephone scams, fraud using the United States Post Office, Email fraud, Text fraud, Website fraud, and in person often door to door. How can you be sure that when you drop your money in a pot next to a person dressed in a Santa Claus Suit is actually a real charity and not just for him or herself taking your money and putting it in THEIR pocket? Some very large so called animal rights groups collect millions of dollars annually and yet they keep all their money off shore in foreign banks, pay excessive salaries and bonuses to top executives, and NEVER actually help any animal efforts for example. This is fraud!
There is a total failure in America concerning charity fraud every single day. It has been my direct experience that State Attorney Generals DO NOT take charity fraud very seriously in anyway. Examples are Arizona, California and New Mexico when contacted, the Attorney General either did not respond to complaints or sent a letter saying they were too busy to deal with the issue! FACT! Shameful! Scammers know this too and target weak non-responding non-enforcing states!
Action MUST be taken to protect all Americans against charity fraud and also to protect those legitimate charities in America that are working hard to help their fellow Americans.