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General Charities Questions

  • No.

    All charities are nonprofits, but not all nonprofits are charities. Generally, any organization that has received a tax-exemption from the IRS under section 501(c)(3) of the Internal Revenue Code is a charitable organization obligated to use its assets for charitable purposes. Donations to 501(c)(3) organizations may be itemized as deductions for charitable contributions on donors' federal income tax returns. By contrast, trade associations, homeowners associations, civic leagues and other nonprofits, while tax-exempt with the IRS, are not charities and contributions are generally not deductible.

  • While there are numerous statutes that may apply to entities with a charitable purpose, there are three major Michigan laws that affect most charities:

    For example, most Michigan charities soliciting or receiving $25,000 in a 12-month period or employing anyone with fundraising duties must register to solicit under the Charitable Organizations and Solicitations Act. Michigan charities registered to solicit would be automatically registered under the Supervision of Trustees for Charitable Purposes Act. Those organizations not required to register under the Charitable Organizations and Solicitations Act, i.e., those charities that do not solicit, would need to register only under the Supervision of Trustees for Charitable Purposes Act. Out-of-state charities soliciting donations, but without assets in Michigan, only need to register under the Charitable Organizations and Solicitations Act.

    If a Michigan charity dissolves, the Attorney General must approve the distribution of those assets to other charities with a like charitable purpose under the Dissolution Act. All assets, once donated to charities, remain charitable assets, even upon dissolution.

    The Attorney General also administers the Public Safety Solicitation Act, which covers police, firefighter and other safety organizations most of which are not charities, but which solicit from the public.

  • When the Charitable Trust Section registers a charity, it means the charity submitted all information required under the Charitable Organizations and Solicitations Act including:

    • a complete financial statement (usually the IRS Form 990);
    • a list of officers and directors;
    • an indication of the methods of solicitation (and upon our request samples of solicitation materials);
    • contracts with professional fundraisers; and
    • a statement of the purpose for which donations will be used. 

    For submissions on or after January 1, 2015, charities that receive over $275,000 in contributions during the reported year must also provide financial statements reviewed by a certified public accountant; while charities that receive over $525,000 in contributions during the reported year must provide audited financial statements. See MCL 400.273(2)(j) and MCL 400.273(3)(a).

    The existence of a registration does not mean that the Attorney General endorses a charity, or vouches for the accuracy of the factual representations on financial statements and the registration application. For example, the Charitable Trust Section does not affirmatively determine that:

    • the spending on charitable program actually occurred as represented;
    • the charity has been operated according to best practices;
    • directors, officers, employees, contractors, etc., in fact received no greater compensation or benefits than reported; or
    • all salaries are reasonable in relation to the extent and nature of work actually performed by compensated employees.
  • Funds are sometimes raised for an individual's medical bills, for the family of a firefighter who died in the line of duty, or some other need that affects an individual or small group of people. While it is commendable to help individuals in need, the Charitable Organizations and Solicitations Act specifically exempts this type of solicitation from registration when no one is paid for fundraising and all contributions, after any costs of solicitation, are turned over to the named beneficiary.
    Organizations and persons that raise funds for specific individuals or families in need are unlikely to qualify for charitable, tax-exempt status or state that contributions are tax deductible. Under the law, a tax-exempt charity must provide a public benefit (not a benefit to an identifiable person or persons).

  • The Charitable Organizations and Solicitations Act provides that you may not solicit on behalf of a charitable organization without first obtaining written permission of the charity, and you may not represent or imply that you have a sponsorship, approval, affiliation, status, or other connection with a charity that you do not have. It is best to contact the charity to find out how you may volunteer for them or learn what procedures and safeguards they require in any solicitation effort on their behalf. 

    If you do receive funds on behalf of a charity, it is best to have checks made out directly to the charity. There may be tax consequences for you if funds are held by you personally. You may not represent that all of the donation will go to the charity if you subtract any fundraising expenses. If you receive any compensation, you may need to become licensed as a Professional Fundraiser.

  • Starting and running a charity is not a simple undertaking. Charities must comply with state, federal, and sometimes local, laws. Examples of issues and filings include:

    • Corporate initial filing and annual updates;
    • State registration and annual reporting;
    • Applying to the IRS for tax-exempt status; or
    • Board liability and other governance issues.

    Further, if you hold a raffle, have paid directors or employees, or solicit contributions outside of Michigan, more regulation and reporting are required. 

    You should be aware that most of your governmental filings will be publicly available. This transparency allows donors to educate themselves on the programs and effectiveness of an organization.

    Information on starting a nonprofit is available through the Michigan Nonprofit Association. Michigan's Department of Licensing and Regulatory Affairs (LARA) also has information on their requirements at their website.

  • Statements and promises made on behalf of charities must be accurate and not misleading. These representations may appear in reports to the Charitable Trust Section, on the IRS Form 990, in publications by the organization, or in solicitation material. Accordingly, if the Charitable Trust Section receives information questioning statements by a charity regarding its operations and activities, we may require a charity to demonstrate that the statements are true.

    Free speech protections in the United States Constitution prohibit requirements that charities spend a minimal percentage of a donor's contributions on a charitable purpose. Schaumburg v. Citizens for Better Env't, 444 U.S. 620 (1980). In the Schaumburg case, the U.S. Supreme Court invalidated a law requiring applicants for solicitation permits to spend at least 75% of receipts for charitable purposes that did not include salaries and administrative expenses.). Unfortunately, some charities spend most of their funds on fundraising and administrative costs rather than their claimed charitable program.

    If the Charitable Trust Section suspects that very little or no actual charitable activity is taking place, or that a charity has inaccurately reported that money was spent on providing charitable services, we may request documents or otherwise investigate an organization's operations and activities. In cases of fraud, the Attorney General may bring enforcement actions to enjoin a charity, and recover money wrongfully obtained. The charity may also be the subject of civil and criminal penalties. 

  • Correspondence can be emailed, mailed, or faxed to the following:

    Department of Attorney General
    Charitable Trust Section
    P.O. Box 30214
    Lansing, MI 48909

    Overnight/Registered/Certified correspondence:

    525 W. Ottawa - 1st Floor
    G. Mennen Williams Bldg.
    Lansing, MI 48933 

    Facsimile Number: 517-241-7074