How New California Regulations Impact Digital Fundraising for Nonprofits

One of the more disruptive digital fundraising storylines in 2023 has been the rollout of a new California law that aims to bring more transparency to digital fundraising as a whole.

In short, California assembly bill No. 488 outlines guidelines to help regulate online fundraising platforms. It also requires nonprofits to submit required fillings and registration fees with government agencies, regardless of where those nonprofits operate.

Let’s explore the key aspects of the new California law, how it impacts social media platforms, the implications for nonprofits that land on a block list and the steps a nonprofit needs to take to avoid non-compliance and potentially lose out on fundraising dollars in the process.

Background on California’s Assembly Bill No. 488

California assembly bill No. 488 went into effect on Jan. 1, regulating organizations that solicit or hold property for charitable purposes. The bill revised the state’s Supervision of Trustees and Fundraisers for Charitable Purposes Act  to require charitable fundraising platforms and platform charities, such as Facebook, to register with the Attorney General's Registry of Charitable Trusts in California, as well as comply with various reporting and disclosure requirements.

This is important to keep in mind, as it plays a big role in how this legislation impacts social media platforms moving forward and, ultimately, nonprofits themselves.

California Assembly Bill No. 488 Impact on Social Media Platforms

For a large part, California assembly bill No. 488 does not directly impact social media platforms and their ability to provide fundraising tools to nonprofits. However, it may indirectly impact social media platforms by requiring nonprofits that solicit donations from California residents to disclose certain information about their finances and governance.

As social media platforms, like Facebook, Instagram and Twitch, increasingly serve as key channels for digital fundraising, they may need to consider how these new requirements impact the organizations using their platforms.

Meta, and by proxy Facebook, is a great example of how online social media platforms will adapt to the new regulations of California assembly bill No. 488. 

A Meta spokesperson shared how the social media platform approaches governmental compliance:

“As part of Meta’s legal obligations to donors and governmental bodies, Meta checks various compliance points of charities, including the Franchise Tax Board block list, Attorney General of California Verification Search and Internal Revenue Service’s revocation list. 

“Organizations that appear on one of the three block lists are prohibited from operating in any capacity in the state of California, so those that were listed were removed from fundraising. “Meta can’t individually check charities’ status and/or review ad-hoc documentation, so they rely on these lists, which are maintained by the agencies themselves.”

What Happens When Your Nonprofit Lands on a Block List 

A huge challenge for nonprofits in 2023 is understanding what, specifically, triggers non-compliance with California assembly bill No. 488 and how this can severely impact fundraising efforts on social media platforms, like Facebook.

I won’t go into the specifics, but here are three things to be aware of that will impact your nonprofit in some capacity if you are currently making use of Facebook giving tools and end up on a block list as a result of not complying with California regulations.

1. Fundraising Efforts Are Halted Immediately

If Facebook giving tools access is shut off, all active fundraisers are stopped instantaneously. However, any money raised before the shutoff is processed as normal and paid out via Meta Pay or Network for Good (depending on what your nonprofit set up originally).

2. It Can Take Weeks (or Longer) to Be Removed From a Governmental Block List

I’ve had a lot of conversations over the last month with nonprofits of all sizes that have been impacted by California assembly bill No. 488. The general consensus seems to be that it can take three to six weeks or, in some cases, longer to follow all of the appropriate steps to be removed from the block list. 

Keep in mind: Even if you are cleared, it will still take time to formally be removed from the online block list — a process that doesn't always have a defined timeline.

3. Your Organization Must Reapply for Facebook Giving Tools

Once your organization is removed from the block list and resubmits an application for Facebook giving tools, it can take an additional two to three weeks for it to process.

Steps to Avoid Block Lists Related to California Assembly Bill No. 488

Here’s the high-level overview of key filings your nonprofit needs to submit to various agencies to stay compliant (or get removed from the block lists):

• State of California Franchise Tax Board. File for exemption or reinstatement (Form 3500 or 3500a, respectively) with the state of California and then annually submit Form 199.
• Attorney General of California. To initially register your organization, use Form CT-1 and pay the $50 registration fee. Then annually renew your organization’s registration with Form RRF-1 (and/or Form CT-TR-1 if you don’t file IRS Form 990 or 990-EZ). Renewal fees range from $25 to $1,200 depending on the nonprofit’s total revenue, though select charitable entities are exempt.
• Internal Revenue Service (IRS). Stay compliant with all federal filings, including your organization’s initial registration and annual returns via Form 990.

It can be a lot to take in, but I’ve done my best to provide all of the appropriate resources and in-depth information that is needed to understand the mechanics of California assembly bill No. 488.

The preceding blog was provided by an individual unaffiliated with NonProfit PRO. The views expressed within do not directly reflect the thoughts or opinions of NonProfit PRO.