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BY Lizbeth Nevarez
POSTED ON March 08, 2024

California AB 488 went into effect on January 1, 2023 with a purpose of increasing transparency for online giving platforms such as Facebook, Paypal Giving and Blackbaud. The law requires that these charitable giving platforms only solicit contributions for California nonprofit organizations who are in good standing.

WHEN IS AN ORGANIZATION CONSIDERED TO BE IN GOOD STANDING?

Fundraising platforms must ensure that the nonprofit organizations meet the following three requirements:

  1. Federal tax-exempt status on the IRS website is current and the organization is not included in the revocation list.
  2. State tax-exempt status is current and has not been suspended or revoked according to the California Franchise Tax Board.
  3. California Attorney General registration and reporting requirements are met and exempt status is current.

All three of these government agencies allow the public to check the status of the organization through these agencies’ respective websites.

If the organization falls out of good standing with any of the above listed government agencies, the organization will lose access to these fundraising platforms and will lose out on donor contributions until the status has been remedied.

WHAT ARE SOME REASONS NONPROFITS CAN FALL OUT OF COMPLIANCE?

  • The IRS can automatically revoke tax-exempt status for non-filing of the annual Form 990N, Form 990EZ or Form 990 for three consecutive years.
  • The California Franchise Tax Board can suspend a nonprofit’s tax-exempt status for being noncompliant with the California Secretary of State for missing the Statement of Information Form SI-100 filing.
  • The California Attorney General can suspend tax-exempt status for filing an incomplete annual renewal Form RRF-1. An incomplete filing can be caused by several factors:
    • Not attaching the required tax filing Form 990EZ, Form 990 or CT-TR-1
    • Not including the required annual filing fee
    • Missing explanations if boxes 1 through 7 were marked as “yes”
    • Not obtaining a financial audit when gross receipts exceeded $2 million for the filing year

Any organization that uses online platforms to fundraise should stay on top of all required filings and periodically check all three of the above government agencies’ websites to ensure they are in good standing and no filings have been missed.

To learn more about this law and how organizations can remain in compliance, please reach out to GHJ’s Nonprofit Tax Practice.