Key Considerations as Nonprofits Shift to Online Fundraising

Not-for-Profit | R. Matthew Frank | Jul 20, 2020

The coronavirus pandemic has created a massive shift in the daily operations of all nonprofit organizations globally. If your mission is not directly related to the pandemic relief it may be challenging to convince your donors that your critical cause still needs funding. You’ll likely need to expand and find new and different ways of fundraising that you may not have planned on using. One of those avenues is online fundraising. While national nonprofit organizations have been online fundraising for years, smaller, localized organizations may be trying it for the first time. If you’re new to online fundraising, there are a few key things you should consider:

Online Selling as Fundraising

A fantastic way for nonprofit organizations to diversify their website revenue is to become an online seller, offering merchandise and other items to promote your program. Just be careful about what you sell. If the items in your online store aren’t substantially related to the organization’s exempt purpose, the IRS might consider the income from those sales as unrelated business income (UBI) and possibly require that you file a form 990-T exempt organization business income tax return. In addition, you should be mindful that some (but not all!) states may require a state income tax return be filed as well, should the organization need to file a Federal 990-T.

Use Donor Notifications for Repeat Contributions

Most organizations know the various substantiation and disclosure requirements the IRS imposes on organizations when a donor contributes cash and non-cash items. IRS Publication 1771 states that the nonprofit must acknowledge the gift by notifying the donor of the contribution amount, date of contribution, and if applicable, that no goods or services were exchanged for the gift. Instead of viewing this acknowledgment as a tedious task, think of it is a great opportunity to share more about your organization so your donor will become a repetitive contributor. It’s one of your first steps towards donor retention, and probably one of the easiest.

Make Sure You’re Registered

Many local organizations are unaware that almost every state requires a formal state registration be completed if the organization intends to raise money in that state. Before beginning online fundraising, it is important to be aware of every state’s various fundraising rules before you can legally raise money in that state. Engaging the services of an accounting firm specializing in nonprofit fundraising is paramount for keeping your organization compliant with state solicitation laws.

These are some areas to consider in launching your online fundraising. Please bear in mind that while this global pandemic is unchartered territory for all of us, fundraising during times of crisis and disaster is not. The best thing a Not-for-Profit organization can do during these uncertain times is to continue to work for everyone’s best interest.


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