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Business Advice and Financial PlanningThe newsletter of the ISBA’s Section on Business Advice and Financial Planning

October 2010, vol. 25, no. 1

Charitable organization registration in Illinois made easy

Under Illinois law, all charitable organizations, trusts, and professional fundraisers, solicitors, and consultants are required to register each year with the Attorney General’s office, prior to soliciting or holding any charitable funds in Illinois. The relevant statutes are the Charitable Trust Act (760 ILCS 55/1 et. seq.) and the Solicitation for Charity Act (225 ILCS 460/1 et seq.). The text of these two statutes is available on the Illinois Attorney General’s Web site. The Charitable Trust Act applies to all trustees that hold property in excess of $4,000 for charitable purposes. The Solicitation of Charity Act governs the solicitation and collection of charitable funds in Illinois. The Attorney General’s “Building Better Charities” Web site, <http://www.illinoisattorneygeneral.gov/charities/index.html>, provides all the necessary forms and instructions to register a charitable trust or organization in Illinois.

Forming a Charitable Organization

The steps in forming a charitable trust or other entity are outside the scope of this article. A person or group wishing to form a charitable organization should consult experienced legal counsel. However, prior to soliciting or holding any charitable funds in Illinois, an organization must contact three different governmental bodies, in addition to the Illinois Office of the Attorney General:

1. Secretary of State, Department of Business Services, Corporation Division. A charitable group must contact the Secretary of State’s Department of Business Services if it will proceed as an incorporated organization. To find more information about this process, or to find contact information for the Department, go to URL <http://www.cyberdriveillinois.com/departments/business_services/publications_and_forms/nfp.html>.

2. Internal Revenue Service. A charitable organization must contact the Internal Revenue Service to apply for 501(c)(3) exempt status, or any other applicable exemption reserved for non-profit groups. To find more information about this process, or to find contact information for the IRS, go to URL <http://www.irs.gov/charities/index.html>.

3. Illinois Department of Revenue. An organization needs to contact the Illinois Department of Revenue (IDR) if it wishes to apply for exemption from the state sales tax. To find more information about this process, or to find contact information for IDR, go to URL <http://www.revenue.state.il.us/NonProfits/index.htm>.

The Charitable Trust Act

The Charitable Trust Act requires that all trustees who have held $4,000 or more in charitable assets, at any time in the previous 12 months, to register annually with the Illinois Attorney General’s Office. Trustees include individuals, groups of individuals, associations, organizations, corporations or other legal entities, the officers and directors of any charitable organization, corporation, or other legal entity, and estate representatives. In other words, the State considers charitable corporate entities, partnerships, or other organizations as charitable trusts, so such organizations must comply with the Act. Therefore, charitable entities as diverse as the Edgar County Chapter of the American Red Cross, Girls in the Game NFP, Arlington Heights Crime Stoppers Inc., and The Cradle Foundation are all subject to the same rules.

To register a charitable trust for the first time, the trustee must file forms CO-1 (Registration Statement) and CO-2 (Financial Information Form) with the Attorney General’s office within 6 months of initially receiving charitable assets. The trustee must also submit the following:

1. A copy of the instrument creating and governing the trust;

2. Articles of incorporation and certificate of good standing, partnership agreement, bylaws, and other such organizational documents;

3. Federal tax returns from the previous three years (if the trust has only existed for less than one year, simply submit the CO-2);

4. A list of names, mailing addresses, and daytime telephone numbers of all trustees, directors, and officers;

5. An IRS determination letter, or a copy of a submitted IRS 1023 or 1024 (to prove 501(c)(3) status);

6. Copies of any fundraising contracts;

7. A $15 registration fee;

8. A $200 late registration fee if applicable; and

9. A $100 late fee for each late annual report, if applicable.

Every year thereafter, within six months of the trusts fiscal year end, a trustee must submit an AG990-IL (Annual Report Form), unless the trust holds less than $25,000. Trustees that hold less than $25,000 may instead fill out the simpler CO-2 every year. Each of these forms, the CO-1, CO-2, and AG990-IL, plus detailed instructions for each, is readily available on the Attorney General’s Web site.

Charitable assets are those held for “charitable, benevolent, philanthropic, patriotic, or eleemosynary” purposes. Therefore, any organization or trust which holds or solicits funds for these purposes are subject to the Act. However, government organizations, schools, and hospitals are all exempt from its provisions. Religious organizations must file the CO-3, the Religious Organization Exemption Form, to avoid filing annually. If you or your client are unsure if an organization is subject to the Charitable Trust Act or not, consult with a law firm knowledgeable in charitable organizations for further clarification.

The Solicitation for Charity Act

The Solicitation for Charity Act requires that any person or organization that solicits any amount of charitable funds within the State of Illinois must first register with the Attorney General’s Office. The registration process is the same as that described in the Charitable Trust Act, but there are a few extra requirements for professional fundraisers, solicitors, and fundraising consultants. A professional fundraiser must submit the following:

1. $100 registration fee;

2. Form PFR-01, the Professional Fundraiser Registration Statement;

3. Form PFR-02, the Professional Fundraiser Annual Financial Report;

4. Federal tax return for the previous year;

5. IFC Report of Individual Fundraising Campaigns, which gives the details of each fundraising campaign conducted by the charitable organization;

6. Form PFR-04, the Professional Solicitor Compensation Report;

7. Form PFR-05, the Explanation of Professional Fundraiser Fees;

8. Form PFR-06, the Professional Fundraiser List of Charities and Contracts;

9. A copy of each fundraising contract, plus a $25 fee for each contract;

10. Form CS-06, which requires a $10,000 bond, expiring on June 30 of the next year;

11. Form PS-01, the Professional Solicitor Registration Statement for each solicitor the fundraiser employs;

12. Articles of incorporation and certificate of good standing, partnership agreement, bylaws, and other such organizational documents;

13. Certificate of Authority to Transact Business in Illinois, if the fundraiser is an out of state entity; and

14. A list of all locations used for fundraising, which must include street addresses and phone number.

Professional fundraisers must renew their registration every year by June 30, provided they are still raising money in Illinois. Additionally, six-month financial reports are due every September 30.

Professional solicitors must work for a professional fundraiser to raise charitable funds in Illinois. A professional fundraiser must yearly submit a PS-01 for each professional solicitor it employs, as described above. Make sure your professional fundraising clients know that no one with a criminal record may solicit charitable funds in the State of Illinois.

Professional fundraising consultants must also register every two years, by June 30, and submit the following:

1. Form PFC-01, the Professional Fundraising Consultant Registration Statement;

2. Copies of all fundraising consultant contracts in Illinois; and

3. An affidavit stating that the professional fundraising consultant has not, and will not at any time, have any custody or control over charitable contributions.

The forms that are required of Professional Fundraisers, Solicitors, and Consultants are readily available on the Attorney General’s Web site, as are detailed instructions on the registration process. However, some of the forms are complicated and collect a great deal of personal and financial information. It is highly recommended that charitable trusts and organizations, fundraisers and solicitors, and consultants seek advice from law firms that are knowledgeable of the charitable formation and registration process.

Final note

The Attorney General’s office routinely fields questions concerning whether or not a particular charitable organization must register in Illinois. Many organization leaders, or their attorneys, mistakenly believe that small organizations or trusts do not have to register. Unfortunately, this mistaken belief has led the leaders of small organizations to find their organization several hundred dollars in arrears to the State, which can be difficult for a small organization to pay. Additionally, charitable groups would much rather use their money for charitable purposes, rather than to fill the State’s coffers. For you and your client’s sakes, remember that under Illinois law, all charitable organizations, trusts, and professional fundraisers must register with the Attorney General’s Office prior to holding or soliciting any charitable funds in Illinois. ■


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