The Law of Fundraising. Bruce R. Hopkins
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charitable organization usually is defined for these purposes as any person organized and operated for a charitable 10 purpose. The word person is then broadly defined, employing terms such as individual, organization, trust, foundation, association, partnership, corporation, firm, company, society, league, or other group or combination acting as a unit.
Often, the term charitable organization also includes a person that “holds itself out” as a charitable entity or one that solicits or obtains contributions solicited from the public.11
These laws usually operate even in the absence of a soliciting charitable organization. That is, anyone soliciting for a charitable purpose generally is required to be in compliance with one or more of these statutes.
(c) Solicitation
Another key term usually defined in a charitable solicitation act is the word solicitation. Solicitation generally is broadly defined. This fact is evidenced not only by the express language of the definition but also by application of these acts to charitable solicitations conducted, in common terminology, “by any means whatsoever.” A solicitation can be oral or written. It can take place by means of an in-person request, mail, email, facsimile, advertisement, other publication, television, radio, telephone, or other medium. Contemporary debate over the legal consequences of charitable solicitation over the Internet highlights the importance and scope of the word solicitation.
A most encompassing, yet typical, definition of the term reads as follows: the term solicit means any request, directly or indirectly, for money, credit, property, financial assistance, or other thing of any kind or value on the plea or representation that such money, credit, property, financial assistance, or other thing of any kind or value is to be used for a charitable purpose12 or benefit a charitable organization.13
Usually, the word solicitation is used in tandem with the word contribution. The term may, however, encompass the pursuit of a grant from a private foundation, other nonprofit organization, or government department or agency. About a dozen states exclude the process of applying for a governmental grant from the term solicitation. Occasionally, state law will provide that the word contribution includes a grant from a governmental agency or will exclude the pursuit of a grant from a private foundation. Thus, a charitable organization seeking this type of financial assistance should explore the need to register pursuant to one or more charitable solicitation acts before submitting the grant proposal.
It is clear, although few solicitation acts expressly address the point, that the definition of solicitation entails seeking a charitable gift. There is no requirement that the solicitation be successful; that is, that the request actually results in the making of a gift.
One court created its own definition of the term solicit in this setting, writing that the “theme running through all the cases is that to solicit means ‘to appeal for something,’ ‘to ask earnestly,’ ‘to make petition to,’ ‘to plead for,’ ‘to endeavor to obtain by asking,’ and other similar expressions.”14 This court held that a state's charitable solicitation act did not apply to gambling activities held to generate funds destined for charitable purposes.15
(d) Sale
A few charitable solicitation acts include a definition of the term sale (or sell or sold). A statute may provide that a sale means the transfer of any property or the rendition of any service to any person in exchange for consideration. This may be said to include any purported contribution without which the property would not have been transferred or the services would not have been rendered.
The term consideration is the critical element of this definition, inasmuch as it represents the principal dividing line between a sale and a contribution.16 Consideration is the core component of a bona fide contract: both parties to the bargain must receive approximately equal value in exchange for the participation of the other. Consideration is the reason one person enters into a contract with another; the contracting party is motivated or impelled by the benefit to be derived from the contract (for goods or services), while the compensation to be received by the other contracting person is that person's inducement to the contract. A transaction that is not supported by adequate consideration cannot be a sale.
Likewise, a transaction that is completely supported by consideration cannot be a gift. Some transactions partake of both elements, where the consideration is less than the amount transferred, in which case only the portion in excess of the consideration is a gift. The two most common types of these dual character transactions are the quid pro quo contribution17 and the bargain sale.18
In those states that define a commercial coventure as a charitable sales promotion,19 the term sale usually is defined in that setting.
(e) Contribution
A contribution basically is a transfer of money or property in the absence of consideration—it is to be contrasted with a sale.20 The term may be defined in a charitable solicitation act as a gift, contribution, bequest, devise, or other grant of any money, credit, financial assistance, or property of any kind or value. The statutory definition may embrace promises to contribute (pledges).
The law on this point is the most developed in, not surprisingly, the federal income tax charitable giving setting. Years ago, the U.S. Supreme Court observed that a contribution is a transfer motivated by “detached or disinterested generosity.”21 Another observation from the Court was that a “payment of money [or transfer of other property] generally cannot constitute a charitable contribution if the contributor expects a substantial benefit in return.”22 Earlier, the Court referred to a contribution as a transfer made “out of affection, respect, admiration, charity or like impulses.”23
The Court has adopted use of the reference to consideration in determining what is a contribution. Thus, it wrote: “The sine qua non of a charitable contribution is a transfer of money or property without adequate consideration. The taxpayer, therefore, must at a minimum demonstrate that he [or she] purposefully contributed money or property in excess of the value of any benefit he [or she] received in return.”24 Essentially the same rule was subsequently articulated by the Court, when it ruled that an exchange having an “inherently reciprocal nature” is not a contribution and thus cannot be a charitable contribution where the recipient is a charitable organization.25
Dues, being payments for services, are not contributions. The term dues embraces payments by members of an organization in the form of membership dues, fees, assessments, or fines, as well as fees for services rendered to individual