Nonprofits with Under $25,000 in Annual Contributions Now Exempt from D.C. Charitable Solicitation and Business Licensing Requirements

Nonprofits in the District of Columbia are generally required to obtain a charitable solicitation license from the D.C. Department of Consumer and Regulatory Affairs (DCRA) before they can solicit donations, apply for grants, or engage in other fundraising activities.

In the summer of 2018, DCRA implemented a new exemption to this licensing requirement for nonprofits receiving less than $25,000 in annual contributions and which do not pay fundraising personnel.  This exemption significantly increases the number of small, start-up, and/or community-based nonprofits which are not required to apply for a charitable solicitation license or pay the applicable licensing fees.

Background: D.C. Charitable Solicitation Licensing Requirements

To protect the public from fraudulent or unethical fundraising practices, over 40 states and the District of Columbia have laws regulating the solicitation of charitable funds.  In D.C., nonprofits become licensed to fundraise by applying for a Basic Business License (BBL) from DCRA under the “Charitable Solicitation” category.  This license is generally required before a nonprofit can do any kind of oral, mail-based, or electronic fundraising, including asking for donations or fundraising via grant applications, event ticket sales, commercial co-ventures, or other avenues.  

Nonprofits can only apply for the charitable solicitation BBL after incorporating their organization, obtaining 501(c)(3) status from the Internal Revenue Service, completing their tax registration with the D.C. Office of Tax and Revenue, and obtaining either a Certificate of Occupancy or Home Occupation Permit for their physical premises. The application fee for the BBL is $412.50.  The license lasts for two years, at which point it must be renewed with an additional $412.50 fee.

Background: The New Exemption for Small Organizations

Prior to the recent changes, there were a limited number of exemptions from the District’s charitable solicitation licensing requirements. Organizations that solicit solely from their members or their members’ families, that engage solely in workplace giving campaigns, that are religious organizations soliciting solely for educational and/or religious purposes, and small organizations with under $1,500 in annual revenue were exempt from the licensing requirement.

Under the old exemption scheme, new or small nonprofits would be required to apply for a BBL and pay the $412.50 application fee as soon as they received more than $1,500 in contributions.  The D.C. Council recognized in 2016 that this created a prohibitive burden for some small organizations, effectively requiring them to spend a significant amount of their start-up capital on the District’s licensing fees – creating a “catch-22” for organizations who could find it “too expensive to raise money.” Council members also observed that the District’s fee was one of the highest in the nation, and that the original $1,500 exemption threshold was set in 1957.  As a result, the Council passed the Charitable Solicitations Relief Amendment Act of 2016 to raise the exemption threshold to $25,000, adjusted annually for inflation.

Scope of the New Exemption

Per DCRA’s new regulations, nonprofits are not required to obtain a charitable solicitation BBL if the following conditions are met:

(a) The organization did not receive more than $25,000 in contributions in the previous calendar year;  
(b) The organization does not expect to receive more than $25,000 in contributions in the current calendar year;
(c) All functions, including fundraising functions, of exempt persons or individuals are performed by unpaid individuals; and  
(d) The organization does not use charitable contributions for the benefit of any officer, member, or solicitor of the organization.

Additional Resources

• D.C. Bar Pro Bono Center Legal Alert: D.C., Maryland and Virginia Charitable Solicitation Registration Requirements
• DCRA Charitable Solicitation License website