On January 1, 2023, California’s Assembly Bill 488, The Supervision of Trustees and Fundraisers for Charitable Purposes Act (the “Act”), went into effect. The Act was proposed in 2021 to regulate online charitable giving platforms in an effort to protect donors and charities from fraud and deceptive or unfair solicitation given the rise of online charitable giving campaigns. The Act allows the state greater regulatory supervision of online charitable fundraising activities through the addition of two new regulated classes: Charitable Fundraising Platforms and Platform Charities.
Who is affected by this new law? Any company, person, or entity that conducts online charitable promotions. Among others, this includes any Commercial Co-venture (“CCV”) conducted either fully or partially online, donating funds to more than six different charities during a calendar year.
Charitable Fundraising Platforms
A Charitable Fundraising Platform is defined as “certain legal entities that use the internet to provide a website, service, or other platform to persons in [California], and perform, permit, or otherwise enable certain acts of solicitation to occur.” This includes platforms that provide donations to charities listed on their website based on (i) peer-to-peer charitable fundraising; (ii) recommendations made by the person using the platform; or (iii) purchases made or other activities performed on the platform. Online platforms such as CrowdRise and online retailers who include the purchase of products online as part of a charitable sales promotion can be included in this new category.
However, a Charitable Fundraising Platform does not include:
- A charitable organization’s own platform that solicits donations only for itself;
- A vendor that solely provides technical or supportive services to a charitable fundraising platform; or
- A sponsoring organization of donor-advised funds.
A Platform Charity is defined as “a trustee or charitable corporation … that facilitates described acts of solicitation on a charitable fundraising platform.” In other words, this includes nonprofit intermediaries who solicit and receive donations through fundraising platforms.
Currently, CCVs operating in the state of California are not required to register with the state if they meet certain requirements, including (i) having a written contract with the charitable entity before the CCV is advertised; (ii) transferring to the applicable charity the donations promised on a rolling 90-day basis; and (iii) providing the charity with an accounting with each payment to confirm accurate calculation of the amount. CCVs falling into one of the below categories will continue to follow the existing CCV laws:
- A CCV conducted fully online, benefitting 6 or fewer recipient charitable organizations per calendar year;
- A CCV conducted both in-person and online, benefitting 6 or fewer recipient charitable organizations per calendar year;
- A CCV conducted fully in-person.
Under the Act, a CCV may also meet the definition of a Charitable Fundraising Platform. When this is the case, then the CCV must register as a Charitable Fundraising Platform when (i) the solicitation is conducted at least in part online; (ii) the solicitation is directed towards individuals in California; and (iii) the donation(s) benefit six or more recipient charitable organizations per calendar year. Along with the requirement to register, the CCV must also comply with the below:
- Provide disclosures to prevent public deception, confusion, and misunderstanding;
- Issue tax donation receipts (when applicable);
- Promptly distribute donations to charities;
- Only solicit for charities that gave prior consent;
- The charities must be in good standing in the state of California.
Although the Act is now in effect, some of the newly-added requirements will be delayed until January 1, 2024, while the regulations necessary to administer the law are finalized. The California Department of Justice has sought public comments to the publications of a Notice of Proposed Rulemaking, as well as a Notice of Modifications. The accepted comments are currently under review and the regulations are undergoing modification, with the intent of implementation January 1, 2024.
However, several aspects of AB 488 remain in effect as law, specifically the requirements that Charitable Fundraising Platforms and Platform Charities (i) ensure they are in “good standing” in the state of California; (ii) not misuse charitable funds, which must be maintained in a separate account from other funds; and (iii) make disclosures to avoid deception or confusion, such as the name of the recipient of the donations. Additionally, if a program uses a charity name without consent, then the Charitable Fundraising Platform must ensure it complies with certain disclosure and removal requirements of AB 488.
Those who wish to conduct a CCV in the state of California on or after January 1, 2023 should ensure the selected charity is in good standing, charitable funds are properly segregated, proper disclosures are made, and solicitations for non-consenting charities follow the necessary requirements. Additional requirements, including registration obligations for Charitable Fundraising Platforms and Platform Charities, are in the works and set to go into effect January 1, 2024.