January 1, 2025
California’s AB 488 Enhances Oversight of Charitable Fundraising Platforms
California Assembly Bill 488, fully effective with all provisions starting January 1, 2025, introduces new regulations impacting nonprofit fundraising under the California Department of Justice. While not directly targeting charities, the law imposes requirements on charitable fundraising platforms, aimed to enhance transparency and donor protection. Charities using these platforms may face indirect effects, such as increased compliance costs or delays, as platforms adapt to the rules.
Signed into law on October 7, 2021, as Chapter 616, Statutes of 2021, Assembly Bill 488 amends the Supervision of Trustees and Fundraisers for Charitable Purposes Act to regulate online charitable fundraising platforms and platform charities. Effective January 1, 2023, with final regulations issued March 26, 2024, platforms must register with the California Attorney General’s Registry of Charities and Fundraisers using Form PL-1 by June 12, 2024, and file annual renewals (Form PL-2) and reports (Form PL-4) starting in 2025. Platforms must obtain written consent from charities, ensure donations go to organizations in good standing, provide donor receipts within five business days, and promptly disburse funds. Nonprofits must verify their status to avoid fundraising restrictions.
Read the details of Assembly Bill 488
Key Highlights of AB 488
Regulation of Charitable Fundraising Platforms:
- Definition: A “charitable fundraising platform” is any entity using the internet to provide a website, service, or platform facilitating solicitations, including online donation pages, crowdfunding, charitable sales promotions, or programs encouraging donations (e.g., checkout donations or free-action programs).
- Registration Requirements:
- Platforms must register with the California Attorney General’s Registry of Charities and Fundraisers using Form PL-1 (initial registration, due by June 12, 2024, for existing platforms).
- Annual renewals are required using Form PL-2, and platforms must submit Form PL-4 annually by March 31, starting in 2025, to report fundraising activities, including total donations, fees charged, and disbursements to charities.
- Registration fees range from $625 to $1,250, depending on the platform’s revenue, as specified in the regulations.
- Exemption for Small Platforms: Platforms benefiting six or fewer charities annually may follow existing commercial co-venturer rules instead of full platform registration, provided they meet specific criteria (e.g., no direct donations or fees).
Consent and Transparency Requirements:
- Platforms must obtain written consent from a charitable organization before using its name or likeness in solicitations.
- Platforms must provide donors with electronic receipts within five business days of a donation, detailing the amount, date, recipient charity, and platform contact information.
- Platforms must disclose whether donations are tax-deductible and provide transparency about fees or revenue-sharing arrangements.
Prompt Disbursement of Funds:
- Platforms must disburse donations to charities within 30 days of receipt, unless otherwise agreed in writing, and only to organizations in good standing with the IRS, California AG, and FTB.
- Platforms must maintain records of donations, disbursements, and fees for at least 10 years, subject to AG inspection.
Platform Charity Requirements:
- A “platform charity” (a charitable organization facilitating solicitations on a platform) must also comply with registration and reporting requirements if it acts as an intermediary for other charities.
- Platform charities must ensure compliance with state regulations and maintain good standing.
Prohibited Acts:
- Platforms cannot facilitate donations to charities that are delinquent, suspended, or revoked by the California AG, SOS, or FTB.
- Misleading representations or failure to comply with registration and disclosure requirements may result in enforcement actions, including fines or suspension.
Impact on Nonprofits Utilizing Fundraising Platforms (e.g., Facebook, Blackbaud)
AB 488 significantly impacts nonprofits by requiring them to maintain good standing with the California Secretary of State (SOS), Attorney General’s Office (AG), and Franchise Tax Board (FTB) to utilize fundraising platforms like Facebook, Blackbaud, or similar services. Here’s how:
Good Standing Requirement:
- Definition: Nonprofits must be in good standing with:
- California Attorney General: Registered with the AG’s Registry of Charities and Fundraisers, with up-to-date Form RRF-1 (Annual Registration Renewal Fee Report) and IRS Form 990 (or 990-EZ/990-N) filings, and no delinquent or revoked status.
- Secretary of State (SOS): For California-incorporated nonprofits or foreign nonprofits registered to do business in California, this means current Statement of Information (Form SI-100) filings and no suspension or dissolution.
- Franchise Tax Board (FTB): Active tax-exempt status with no revocation due to unpaid taxes or failure to file required returns (e.g., Form 199 or Form 199N for small nonprofits).
- Impact: Platforms like Facebook (via its charitable giving tools, often processed through Network for Good or PayPal Giving Fund) and Blackbaud (e.g., Blackbaud Giving Fund or fundraising software) are considered “charitable fundraising platforms” under AB 488. These platforms must verify that recipient nonprofits are in good standing before disbursing funds. Nonprofits that are delinquent, suspended, or revoked by the AG, SOS, or FTB are prohibited from receiving donations through these platforms.
Compliance Burden for Nonprofits:
- Registration and Reporting: Nonprofits soliciting in California, including through platforms, must register with the AG’s Registry and file annual reports (Form RRF-1 and IRS Form 990 series) by the 15th day of the 5th month after the fiscal year-end (e.g., May 15 for calendar-year organizations), with possible extensions aligned with IRS deadlines.
- Fees: Annual registration fees range from $25 to $1,200, based on gross annual revenue.
- Exemptions: Limited exemptions apply (e.g., for organizations with less than $50,000 in revenue or certain religious organizations), but most nonprofits using platforms like Facebook or Blackbaud will need to register if soliciting in California.
- Verification Process: Platforms must confirm a nonprofit’s good standing before facilitating solicitations or disbursing funds. For example:
- Facebook: Uses third-party processors (e.g., PayPal Giving Fund) to verify nonprofit status with the IRS and state regulators.
- Blackbaud: Requires nonprofits to provide proof of 501(c)(3) status and state compliance for fundraising tools like Blackbaud Peer-to-Peer Fundraising or Giving Fund.
- Consequence of Non-Compliance: If a nonprofit is not in good standing (e.g., delinquent Form RRF-1, suspended by SOS for missing Form SI-100, or revoked by FTB for non-filing of Form 199), platforms are prohibited from processing or disbursing donations to that organization, potentially disrupting fundraising campaigns.
Practical Implications for Nonprofits:
- Maintaining Compliance: Nonprofits must ensure timely filings with:
- Platform-Specific Requirements: Nonprofits using platforms like Facebook or Blackbaud must provide documentation (e.g., IRS determination letter, EIN, state registration details) during onboarding to verify eligibility. Failure to maintain good standing may result in removal from the platform or delayed fund disbursement.
- Donor Transparency: Nonprofits must ensure platforms accurately represent their mission and tax-deductible status in solicitations, as AB 488 requires platforms to obtain written consent and provide clear donor disclosures.
Retroactive and Ongoing Impact:
- Effective Dates: While AB 488 was signed in 2021, the final regulations issued on March 26, 2024, required platforms to register by June 12, 2024, and comply with annual reporting starting in 2025. Nonprofits were impacted as platforms began enforcing good standing requirements in 2024.
- Ongoing Compliance: Nonprofits must monitor their status with the AG, SOS, and FTB to avoid disruptions in fundraising through platforms. Delinquency (e.g., late filings or unpaid fees) can lead to suspension, blocking access to platform funds.
Additional Context
- Legislative Intent: AB 488 aims to enhance transparency and protect donors by regulating online fundraising platforms, ensuring donations reach legitimate, compliant charities. It addresses the rise of digital fundraising (e.g., crowdfunding, social media platforms) while aligning with California’s existing charitable oversight framework.
- Other Requirements: Nonprofits must also comply with California’s solicitation disclosure requirements (e.g., including “A COPY OF THE OFFICIAL REGISTRATION AND FINANCIAL INFORMATION MAY BE OBTAINED FROM THE ATTORNEY GENERAL’S WEBSITE” on solicitation materials) and ensure platforms meet these standards.