Feb. 28, 2011, 5 a.m.
posted by legendcoder
Soliciting Donations and Contributions
Nonprofit organizations with tight budgets usually don't have the resources to set up their own custom donation collection engines, but that shouldn't stop youor one of your clientsfrom using the web as a fundraising channel. What should stop youor at least give you pauseare the little-known legal requirements of doing so. Online fundraising is a prime example of pre-Internet laws and regulations that take the ease out of transacting business over the Web, at least for the web site owner.
If your organization is a legal charity or nonprofit in the United States (and the donations you collect are tax deductible), then you must register with most of the 50 states in the union to solicit donations from residents of those states. These requirements apply not only to web-based solicitations, but to direct mail, telemarketing, and print advertisements as well. While there are some exemptions for religious groups, educational institutions, and organizations whose annual collections fall below a certain amount, you're better off knowing and fulfilling your legal obligations before the first donation hits your bank account. Failure to register can result in stiff penalties, including the loss of your nonprofit status and the ignominious end to your organization. The Multi-State Filer Project (see link in the "See Also" section of this Recipe) is a clearinghouse for information and resources regarding these regulations.
On the other hand, there also are federal requirements for web sites that are not run by a nonprofit, but who nonetheless seek contributions from visitors to help defray operating costs. In these situations, you must clearly state that the recipient of the contribution is not a registered nonprofit or charity and that the given funds are not tax deductible. Failure to do so might lead to big trouble with the IRS.
If you're still intent on adding a "Donate Now" button to your web site (and who wouldn't be), you have several options from which to choose. By enlisting the services of a third-party payment system, you can avoid having to set up your own credit card merchant account for online transactions and a full-fledged e-commerce system. PayPal is the most well-known of these services; others (see list referred to in the "See Also" section of this Recipe) are geared specifically toward nonprofits.
Although terms and configuration options vary among services, generally they work by allowing an organization to use the service's merchant account and secure transaction processing systems in exchange for a percentage of each transaction, a monthly fee, or both (some also require a one-time setup fee). Many also provide customization tools that will let you create forms and receipt pages on the payment processor's server that bear a striking resemblance to the pages on your own site.
There are a couple of notable, but not insurmountable, downsides to collecting donations this wayand together, they shouldn't be seen as outweighing the benefits of choosing this method of online fundraising for most organizations. I've already alluded to one of them: even if you make every effort to customize the payment pages hosted by your chosen service, they probably will not look exactly like the pages on your site. Some potential donors will not even notice, while others, when confronted with the visual discrepancy and a request for a credit card number, will balk. For those folks, you might want to offer a way to pledge online, and then pay offline.
You also might face limitations in the amount of donor information you can easily collect and archive using a third-party system. If you want to add donors to a mailing list or are legally required to collect certain information from donors (as is the case with some political contributions), look for a payment system that lets you add custom fields to your payment form and download payee information in a format that you can import into an offline database.
The Multi-State Filer Project (http://www.multistatefiling.org) consolidates the information and data requirements of all states that require registration of nonprofit organizations who solicit charitable donations within their jurisdictions.
You can find a comparative list of payment- and donation-collecting systems at http://www.affinityresources.com/pgs/awz55Online.html.