C E N T E R O N N O N P R O F I T S A N D P H I L A N T H R O P Y Bifurcation of State Regulation of Charities Divided Regulatory Authority Over Charities and Its Impact on Charitable Solicitation Laws Cindy M. Lott COLUMBIA UNIVERSITY SCHOOL OF PROFESSIONAL STUDIES Mary L. Shelly UNIFORM LAW COMMISSION Nathan Dietz DO GOOD INSTITUTE, UNIVERSITY OF MARYLAND Marcus Gaddy March 2018 In 27 United States jurisdictions, the attorney general is the sole state-level regulator of charitable organizations and charitable solicitation (Lott et al. 2016). 1 Jurisdictions in which charities are overseen only by the attorney general we consider unitary jurisdictions. 2 In the other 24 jurisdictions, statelevel charity regulation is split between two entities: the state attorney general and another state agency, most commonly the secretary of state (Lott et al. 2016, 7; Fremont-Smith 2004, 372 73). This division of regulatory authority is called bifurcation (Lott et al. 2016, 7). Little has been written about these bifurcated regulatory structures, and little research has examined the effect state-level bifurcated authority has on regulation of the charitable sector (but see Adelstein and Boris 2018). Because nearly half of all US jurisdictions have a bifurcated system, research about the implications of these structures may help state policymakers, legislators, and charities officials as they consider making changes to or improvements in the structure of state-level charities regulation. 3 Bifurcated structures are fundamental components of state charities regulation in the United States. In research about the efficacy and efficiency of regulatory frameworks, however, bifurcation has merited barely a footnote. This brief illuminates the nature of bifurcated offices and assesses how bifurcation matters when trying to understand regulation of the charitable sector. In this paper, we (1) explore several areas of state-level regulation of charitable solicitation (fundraising) through the lens of bifurcation and (2) identify how bifurcation may affect regulatory patterns using our Index of Charitable
Solicitation Regulatory Breadth (hereinafter, the Solicitation Index). These approaches to understanding the regulatory context at the state level may have broad applications for research on charities. Generally, we find that state attorneys general play a large role in the oversight of charitable solicitation in both unitary and bifurcated regulatory regimes. In bifurcated regimes, there is usually a division of labor between attorneys general offices, which are typically involved in enforcement actions or cases in which trust assets (created by soliciting on behalf of a charity) are at risk, and non-attorneys general offices, which are more involved in prophylactic measures (i.e., those requiring registration or notice provisions). 4 In comparing the data on bifurcation with the Solicitation Index, we note that jurisdictions with lower scores on the index are slightly more likely to be unitary (and unitary regimes are always attorney general-only regimes), and higher index scores are almost evenly split between unitary and bifurcated jurisdictions. 5 State charities officials have many models on which to base their regulatory and enforcement regime for state charities oversight, but the state attorney general s office always plays a major role regardless of whether the jurisdiction has a unitary or bifurcated structure. The Bifurcated Regulatory Regime in State Charity Regulation Figure 1 shows which states are unitary jurisdictions and which are bifurcated jurisdictions. The list of bifurcated jurisdictions can be found in the Legal Compendium, a publicly available compilation of statutes governing charities and charitable fundraising in 56 US jurisdictions, part of the Urban Institute s Regulation of the Charitable Sector project. 6 Note that with few exceptions, bifurcated states and unitary states are clustered together geographically. 7 Historically, state attorneys general have been responsible for ensuring the proper use of charitable funds (Fremont-Smith 2004, 54). State attorneys general have common law and/or statutory authority to perform regulatory functions, including many powers of enforcement, to protect charitable assets and regulate charitable organizations (Carlson et al. 2013, 205; Fremont-Smith 2004, 305 21, 373; Mayer 2016, 939 41). In addition, specific statutes targeted at charitable organizations are just a subset of all state statutes that may apply to such organizations (e.g., other broadly applicable state telemarketing and consumer deception statutes, as well as common law fraud, may apply to charitable organizations as well). Despite broad grants of regulatory authority, many state attorneys general take a more limited role in charity regulation because it is just one small part of the full range of regulation undertaken by their offices (Helge 2009, 24 25). 2 B I F U R C A T I O N O F S T A T E R E G U L A T I O N O F C H A R I T I E S
FIGURE 1 Bifurcated and Unitary (AG-Only) Jurisdictions Note: This map reflects data from 51 jurisdictions: each US state and the District of Columbia. In jurisdictions with bifurcated authority, another state agency typically has statutory authority to regulate some aspects or activities of charitable organizations (Lott et al. 2016, 7). Most commonly, these statutes require registration and reporting of charitable organizations and their fundraisers regarding both the charities initial incorporation as legal entities and as organizations that raise funds from the public (Fremont-Smith 2004, 364; Lott et al. 2016, 7; Mayer 2016, 939 41). These statutes often emerge in response to new developments in the field. For example, until World War II, the regulation of charitable solicitation was commonly done at the local level in individual cities and towns (Fremont-Smith 2004, 370). As society became more mobile, states passed statutes to regulate this activity at the state level (Fremont-Smith 2004, 370). Although these and other types of registration and reporting requirements may have initially served a regulatory function, some argue this is no longer the case because of the small amount of information that organizations are required to report and how rarely that reported information is evaluated for noncompliance and fraud (Fishman 2015, 16; Fremont-Smith 2004, 364). There is little analysis of why some jurisdictions have two offices that regulate charities and others have one. From what information is available, this division of regulatory authority is often less the result of a conscious decision to divide regulatory authority among multiple offices and more likely a response to the need for additional oversight of new and developing issues. For example, in Maine, the attorney general has long had statutory authority to regulate charities (Me. Rev. Stat. Ann. 5 194 [1954]), but over time, newer registration and solicitation statutes gave another agency regulatory authority to B I F U R C A T I O N O F S T A T E R E G U L A T I O N O F C H A R I T I E S 3
issue licenses and collect registration fees, among other activities (e.g., the Maine Charitable Solicitations Act, Me. Rev. Stat. Ann. 9 5001 18 [1977]; the Maine Nonprofit Corporation Act, Me. Rev. Stat. Ann. 13-B 101 1406 [1977]). 8 Similarly, the Commonwealth Attorneys Act in Pennsylvania changed the nature of the state attorney general s office to an entity independent of the governor s cabinet and attempted to delineate the powers of the attorney general (see, e.g., 71 Pa. Stat. 732-201 8 [1980]). 9 Because some aspects of charity regulation were not included in the statute, those responsibilities fell to other offices (see, e.g., the Solicitation of Funds for Charitable Purposes Act, 10 Pa. Stat. 162.1 162.23 [1990]). In states with bifurcated regulatory authority, the relationship between the two offices varies: some may be more or less cooperative or integrated, and others are completely separate or have little interaction between the regulatory offices. A few states have deliberately amended their statutes to either consolidate regulatory authority over charities in one office or divide it among two offices in response to inefficiencies caused by the patchwork of regulations that developed over time. New York, for example, recognized that its registration and reporting statutes required organizations to submit duplicative information to two separate regulatory offices and, in 1995, amended its statutes to consolidate all registration and reporting in the office of the attorney general (1995 N.Y. Sess. Laws Ch. 83 [S. 5336, A. 8063] [McKinney]; see also McKinney's Executive Law 172). Before 1995, organizations that held charitable assets or conducted charitable activities had to register with the state attorney general (McKinney's EPTL 8-1.4) and with the secretary of state if they solicited donations from the public (1995 N.Y. Sess. Laws Ch. 83 [S. 5336, A. 8063] [McKinney]). The state of Washington took a different approach and, in 1993, deliberately divided regulation between two offices by amending its 1967 charitable trust regulation statute to clarify that registration and reporting would be overseen by the office of the secretary of state and enforcement of charitable trusts and consumer protection would be overseen by the attorney general (Wash. Rev. Code Ann. 11.110.010) (Fremont-Smith 2004, 312 13). 10 Some suggest that states with two offices regulate the charitable sector more or perhaps better than states with only one office (Reiser 2016, 848). However, cooperation between these offices varies greatly (Mayer 2016, 939 41), leading others to argue that the lack of coordination between state-level regulatory offices prevents some states from adequately and efficiently regulating their charitable sectors (Fishman 2015, 17; Fremont-Smith 2004, 365; Reiser 2016, 848). Little else has been written about the structures of these bifurcated offices (Lott et al. 2016, 7). Charitable Solicitation Regulation and Bifurcation To explore whether and how bifurcation affects regulation of the charitable sector, we examined the available data to see if any patterns emerged among the relationships between certain types of charitable solicitation regulations and whether the jurisdiction was unitary or bifurcated. Using statistical analysis tools, we compared bifurcated jurisdictions with several types of regulations to answer the question: are bifurcated jurisdictions more or less likely to have certain types of statutory requirements? We found that where donor dollars are being transferred or at risk, the state attorney general s office is usually involved to protect the charitable trust created by solicitation on behalf of charitable entities. 4 B I F U R C A T I O N O F S T A T E R E G U L A T I O N O F C H A R I T I E S
Where preventative measures are in play (requiring audits, bonding and submission of contracts for professional fundraisers, etc.), other offices, such as the secretary of state, are likely to take the lead. We also found that state attorney general offices are involved in roughly half of the oversight of preventative measures and charitable solicitation enforcement matters, even if an action is something other than litigation (e.g., a letter of inquiry to the board, a phone call to the executive director, etc.). Solicitation is the most heavily regulated area within state charities regulation. Only 5 of the 51 jurisdictions we reviewed received a score of zero on the Solicitation Index for charitable solicitation regulations; 4 of those offices are unitary jurisdictions and 1 is bifurcated. 11 The remaining 46 jurisdictions split oversight roughly evenly between the state attorney general s office and a different regulatory office. If the jurisdiction is bifurcated, the regulatory authority to oversee charitable solicitation is almost always a secretary of state or other non-attorney general office. For each aspect of solicitation regulation examined in this brief, a similar pattern holds: the jurisdictions that regulate a particular aspect of solicitation are roughly evenly split between bifurcated or unitary regulation. Within the bifurcated jurisdictions, the secretary of state or other non-attorney general office is the most common regulatory office by a large margin. Figures 2 9 illustrate differences in required charitable solicitation regulations among our list of bifurcated and unitary jurisdictions. For each aspect of regulation, there are two charts: one showing the percentages of jurisdictions that regulate or require that particular item and one showing whether these jurisdictions are bifurcated or unitary. FIGURE 2 Regulation of Charitable Solicitation, Unitary and Bifurcated Jurisdictions 8% 8% 45% 47% Regulate 92% Do not regulate Unitary regime and regulates Bifurcated regime and regulates Unitary regime and does not regulate Note: These charts reflect data from 51 jurisdictions: each US state and the District of Columbia. B I F U R C A T I O N O F S T A T E R E G U L A T I O N O F C H A R I T I E S 5
FIGURE 3 Jurisdictions Requiring Registration by Commercial Fundraisers 16% 12% 4% 41% 43% Required 84% Not required Unitary regime and required Bifurcated regime and required Unitary regime and does not require Bifurcated regime and does not require Note: These charts reflect data from 51 jurisdictions: each US state and the District of Columbia. FIGURE 4 Jurisdictions Requiring Registration of Charitable Organizations 18% 16% 2% 37% 45% Required 82% Not required Unitary regime and required Bifurcated regime and required Unitary regime and does not require Bifurcated regime and does not require Note: These charts reflect data from 51 jurisdictions: each US state and the District of Columbia. 6 B I F U R C A T I O N O F S T A T E R E G U L A T I O N O F C H A R I T I E S
FIGURE 5 Jurisdictions Requiring Registration by Fundraising Counsel 18% 24% 47% 53% 29% 29% Required Not required Unitary regime and required Bifurcated regime and required Unitary regime and does not require Bifurcated regime and does not require Note: These charts reflect data from 51 jurisdictions: each US state and the District of Columbia. FIGURE 6 Jurisdictions Requiring Oversight of Commercial Co-Ventures 27% 18% 37% 20% 63% 35% Required Not required Unitary regime and required Bifurcated regime and required Unitary regime and does not require Bifurcated regime and does not require Notes: These charts reflect data from 51 jurisdictions: each US state and the District of Columbia. Oversight here means a requirement that the co-venture be registered or that the charitable organization file the co-venture contract with the state. B I F U R C A T I O N O F S T A T E R E G U L A T I O N O F C H A R I T I E S 7
FIGURE 7 Jurisdictions Requiring Fundraisers to Provide Notice to a State Charities Regulator before Any Solicitation Campaign 27% 18% 37% 20% 63% 35% Required Not required Unitary regime and required Bifurcated regime and required Unitary regime and does not require Bifurcated regime and does not require Note: These charts reflect data from 51 jurisdictions: each US state and the District of Columbia. FIGURE 8 Jurisdictions Requiring Filing of Copies of Contracts between Charitable Organizations and Commercial Fundraisers or Fundraising Counsel 10% 24% 14% 39% 37% Required 76% Not required Unitary regime and required Bifurcated regime and required Unitary regime and does not require Bifurcated regime and does not require Note: These charts reflect data from 51 jurisdictions: each US state and the District of Columbia. 8 B I F U R C A T I O N O F S T A T E R E G U L A T I O N O F C H A R I T I E S
FIGURE 9 Jurisdictions Requiring Financial Reporting by Commercial Fundraisers 14% 31% 18% 35% Required 69% Not required 33% Unitary regime and required Bifurcated regime and required Unitary regime and does not require Bifurcated regime and does not require Note: These charts reflect data from 51 jurisdictions: each US state and the District of Columbia. Index of Charitable Solicitation Regulatory Breadth To illustrate how information on bifurcation and charitable solicitation can be used in other research, we determined if any patterns emerged by comparing these findings with the Solicitation Index, which we helped create last year with Dr. Nathan Dietz and Putnam Barber and which was presented at the 2016 ARNOVA Policy Symposium and published in Nonprofit Policy Forum (Dietz et al. 2017). 12 The Solicitation Index is based on the research in State Regulation and Enforcement in the Charitable Sector, which features the first systematic analysis of state-level oversight and regulation of charities in the United States (Lott et al. 2016, v). 13 To construct this index, we first formed a list of provisions that state charity regulators require of charitable organizations or their fundraisers and information that regulators provide to donors or the public that, if taken together, would indicate that a state s regulatory framework could be considered broad. 14 Conversely, if a state did none (or very few) of them, its framework could be considered narrow. To help us determine which factors should be included, we reached out to current or former staff in five state regulatory offices to ask for 5 10 factors they would consider indicative of a robust regime of regulations specific to charitable organizations. As discussed in the article by Dietz and colleagues (2017, 188), these factors generally answered one of four broad questions: To whom do the regulations apply? What kinds of individuals and organizations are regulated? Does the state regulate aspects of the relationship between an organization and its fundraisers? What does the state s regulatory scheme prohibit? What information is available to the public and donors? B I F U R C A T I O N O F S T A T E R E G U L A T I O N O F C H A R I T I E S 9
Once we had the list of indicators, we assigned yes or no values for each indicator in each state. 15 If state statutes or the state attorney general s or secretary of state s official website indicated that the state required or provided the index item, we coded the item a yes for that state. If statutes had no provisions about a particular indicator, we coded the item a no. 16 To illustrate how these data on bifurcation may be used to examine additional patterns in how charities are regulated, we compared the data on bifurcation and the Solicitation Index. Figure 10 shows the breadth of solicitation regulations and whether a jurisdiction is bifurcated or unitary. Black circles indicate that a state s charity regulation is bifurcated, and the color of the state on the map corresponds to the breadth of its charitable solicitation regulations (Dietz et al. 2017). Generally, we found that jurisdictions with more robust regulatory regimes are almost evenly split between unitary and bifurcated jurisdictions, and jurisdictions with less broad regulatory regimes are slightly more likely to be unitary. FIGURE 10 Charitable Solicitation Regulatory Breadth and Bifurcation Note: This map reflects data from 51 jurisdictions: each US state and the District of Columbia. 10 B I F U R C A T I O N O F S T A T E R E G U L A T I O N O F C H A R I T I E S
Conclusion Our initial research on bifurcated structures for state-level charities regulation indicates that state attorney general offices have a major role in all enforcement actions in both bifurcated and unitary jurisdictions and in about half of the states prophylactic regulatory measures in the unitary jurisdictions. In overlaying the Solicitation Index with bifurcation and charitable solicitation data, we find that (1) states with less robust statutory charitable solicitation regulation tend to be unitary states and (2) states with more robust regulatory breadth are fairly evenly divided between unitary and bifurcated structures. Our research provides a starting point for state charities regulators to review and compare their own regulatory structure against those of other jurisdictions to help determine which model best suits their needs. For example, although more heavily regulated states may opt for a division of labor between state offices in a bifurcated structure, some states (including New York, which moved from a bifurcated to a unitary structure) 17 may find it more efficient or effective for a single office to oversee charitable solicitation, and charitable regulation in general, through a single locus of regulation and enforcement. This paper provides background information and data on bifurcated structures for state charities regulation and illustrates the potential utility of considering bifurcation in research on other state-level areas of charitable regulation. The Solicitation Index is another tool for deeper research on oversight at the state level. The authors hope that this paper will serve as a model for how to use these data to inform future research on the charitable sector. B I F U R C A T I O N O F S T A T E R E G U L A T I O N O F C H A R I T I E S 11
Appendix TABLE A.1 Final List of Solicitation Indicators and Index Scores Requires fundraisers to provide notice before any solicitation campaign Requires registration by commercial fundraisers Requires registration by charitable organizations Requires annual financial reporting by commercial fundraisers Requires filing of copies of contracts Index values (equal weighting) Alabama 8 No Yes Yes Yes Yes Yes Alaska 7 No Yes Yes Yes Yes No Arizona 0 No No No No No No Arkansas 9 Yes Yes Yes Yes Yes Yes California 9 Yes Yes Yes Yes Yes No Colorado 7 Yes Yes Yes Yes No Yes Connecticut 8 Yes Yes Yes Yes Yes Yes Delaware 1 No No No No No No Washington, DC 6 No Yes Yes Yes Yes No Florida 10 Yes Yes Yes Yes Yes Yes Georgia 7 Yes Yes Yes Yes Yes No Hawaii 8 No Yes Yes Yes Yes Yes Idaho 0 No No No No No No Illinois 8 No Yes Yes Yes Yes No Indiana 6 Yes Yes No Yes Yes No Iowa 4 No Yes No No Yes No Kansas 6 No Yes Yes Yes Yes No Kentucky 7 No Yes Yes Yes Yes No Louisiana 6 No Yes Yes No Yes Yes Maine 6 No Yes Yes Yes No No Maryland 9 Yes Yes Yes Yes Yes No Massachusetts 9 No Yes Yes Yes Yes Yes Michigan 6 No Yes Yes Yes Yes No Minnesota 9 Yes Yes Yes Yes Yes No Mississippi 10 Yes Yes Yes Yes Yes Yes Missouri 5 No Yes Yes Yes No No Montana 0 No No No No No No Nebraska 0 No No No No No No Nevada 2 No No Yes No No No New Hampshire 9 Yes Yes Yes No Yes Yes Oversees commercial co-ventures 12 B I F U R C A T I O N O F S T A T E R E G U L A T I O N O F C H A R I T I E S
Requires fundraisers to provide notice before any solicitation campaign Requires registration by commercial fundraisers Requires registration by charitable organizations Requires annual financial reporting by commercial fundraisers Requires filing of copies of contracts Index values (equal weighting) New Jersey 9 No Yes Yes Yes Yes Yes New Mexico 5 No Yes Yes No Yes No New York 9 No Yes Yes Yes Yes Yes North Carolina 7 No Yes Yes Yes Yes No North Dakota 6 No Yes Yes No Yes No Ohio 9 Yes Yes Yes Yes Yes Yes Oklahoma 3 No Yes Yes No No No Oregon 9 Yes Yes Yes Yes Yes Yes Pennsylvania 9 No Yes Yes Yes Yes Yes Rhode Island 6 No Yes Yes No Yes No South Carolina 9 Yes Yes Yes Yes Yes Yes South Dakota 5 Yes Yes No Yes No No Tennessee 10 Yes Yes Yes Yes Yes Yes Texas 6 No No Yes Yes Yes No Utah 7 Yes Yes Yes No Yes Yes Vermont 6 Yes Yes No Yes Yes No Virginia 9 No Yes Yes Yes Yes Yes Washington 7 No Yes Yes Yes Yes No West Virginia 7 No Yes Yes No Yes No Wisconsin 9 Yes Yes Yes Yes Yes No Wyoming 0 No No No No No No Source: Originally published as appendix A in Dietz and colleagues (2017, 195 98). Oversees commercial co-ventures B I F U R C A T I O N O F S T A T E R E G U L A T I O N O F C H A R I T I E S 13
TABLE A.2 Final List of Solicitation Indicators and Index Scores (cont d) Requires registration by fundraising counsel Requires annual financial reporting by charitable organizations Requires bonding of professional fundraisers Index values (equal weighting) Requires specified disclosures to donors Alabama 8 Yes Yes No Yes No Alaska 7 No Yes Yes Yes No Arizona 0 No No No No Yes Arkansas 9 Yes Yes No Yes No California 9 Yes Yes Yes Yes No Colorado 7 No Yes No Yes Yes Connecticut 8 No Yes No Yes Yes Delaware 1 No Yes No No No Washington, DC 6 No Yes Yes No Yes Florida 10 Yes Yes Yes Yes Yes Georgia 7 No Yes No Yes Yes Hawaii 8 Yes Yes No Yes No Idaho 0 No No No No No Illinois 8 Yes Yes Yes Yes No Indiana 6 Yes Yes No No No Iowa 4 No Yes Yes No No Kansas 6 Yes Yes No No Yes Kentucky 7 Yes Yes No Yes No Louisiana 6 No Yes No Yes No Maine 6 No Yes Yes Yes Yes Maryland 9 Yes Yes Yes Yes Yes Massachusetts 9 Yes Yes Yes Yes No Michigan 6 No No Yes Yes No Minnesota 9 Yes Yes Yes Yes No Mississippi 10 Yes Yes Yes Yes Yes Missouri 5 No Yes Yes No No Montana 0 No No No No No Nebraska 0 No No No No No Nevada 2 No Yes No No Yes New Hampshire 9 Yes Yes Yes Yes No New Jersey 9 Yes Yes Yes Yes Yes New Mexico 5 No Yes No Yes No New York 9 Yes Yes Yes Yes No Bifurcated jurisdiction 14 B I F U R C A T I O N O F S T A T E R E G U L A T I O N O F C H A R I T I E S
Requires registration by fundraising counsel Requires annual financial reporting by charitable organizations Requires bonding of professional fundraisers Index values (equal weighting) Requires specified disclosures to donors North Carolina 7 Yes Yes No Yes Yes North Dakota 6 Yes No Yes Yes Yes Ohio 9 No Yes Yes Yes No Oklahoma 3 No Yes No No Yes Oregon 9 Yes Yes Yes No No Pennsylvania 9 Yes Yes Yes Yes Yes Rhode Island 6 Yes Yes No Yes Yes South Carolina 9 Yes Yes No Yes Yes South Dakota 5 No Yes No Yes No Tennessee 10 Yes Yes Yes Yes Yes Texas 6 No Yes Yes Yes No Utah 7 Yes No Yes No Yes Vermont 6 No Yes N/A Yes No Virginia 9 Yes Yes Yes Yes Yes Washington 7 No Yes Yes Yes Yes West Virginia 7 Yes Yes Yes Yes Yes Wisconsin 9 Yes Yes Yes Yes Yes Wyoming 0 No No No No No Source: Originally published as appendix A in Dietz and colleagues (2017, 195 98). Bifurcated jurisdiction B I F U R C A T I O N O F S T A T E R E G U L A T I O N O F C H A R I T I E S 15
Notes 1 We use states and jurisdictions alternately throughout this brief to refer to both US states and US territories. 2 Even if a state s statutes or constitution do not specifically grant the state attorney general the authority to regulate charities, the attorney general has common law authority to protect the public s interest in the proper use of charitable funds (unless the state has, by statute or by constitution, limited the common law authority of the state attorney general). 3 Recent changes to the Exempt Organizations Division of the Internal Revenue Service have led to an overall decrease in the oversight of charitable organizations at the federal level, so the responsibility for state-level oversight has become even more important (Lott and Fremont-Smith 2017, 166 72). See also, Editors and Cindy M. Lott, The Shifting Boundaries of Nonprofit Regulation and Enforcement: A Conversation with Cindy M. Lott, Nonprofit Quarterly, August 3, 2016, https://nonprofitquarterly.org/2016/08/03/shifting-boundaries-nonprofitregulation-enforcement-conversation-cindy-m-lott/. Additionally, many aspects of charitable regulation and enforcement are only within the jurisdiction of the states. Some scholarship has focused on this growing emphasis and visibility at the state level and on the division of regulatory authority between state and federal regulators more generally (Lott and Fremont-Smith 2017, 172 73; Mayer 2016, 938 43). Additional research is needed to shed more light on what this division of regulatory authority looks like within state jurisdictions. 4 Throughout this brief, we are careful to distinguish between the usage of the terms regulation and enforcement. We use the broader term regulation to refer to requirements imposed by statute. We use enforcement to refer to informal proceedings or legal proceedings and litigation that arise in the context of enforcing regulations, statutes, or other common law requirements. 5 Another research topic not fully addressed in this paper that could yield interesting information for the sector is the relationship between the size of the nonprofit sector within each jurisdiction and its regulatory structure and score on the Solicitation Index. Information about the size of the nonprofit sectors in each state is available from the National Center for Charitable Statistics at the Urban Institute, http://nccs.urban.org. In a preliminary examination of this information, we note that the jurisdictions with the largest nonprofit populations and some of the most complex regulatory regimes (e.g., New York, California, Massachusetts, Illinois, Michigan and Texas) are also more likely to be unitary. 6 The Legal Compendium is available for download at State Regulation and Enforcement in the Charitable Sector, Urban Institute, accessed March 1, 2018, http://www.urban.org/policy-centers/center-nonprofits-andphilanthropy/projects/regulation-charitable-sector-project. 7 Although there are many possible reasons that certain states have chosen certain policies, and geographic proximity certainly does not fully explain these choices, policy diffusion could have played a role because state legislatures often pass laws to either encourage or discourage business across state lines. For an overview of policy diffusion see Shipan and Volden (2012, 788 96). 8 Tennessee s bifurcated structure is created by statutes that similarly divide certain aspects of regulatory authority, with some statutes granting regulatory authority to the Secretary of State and some statutes granting regulatory authority to the Attorney General. See, for example, Tenn. Code Ann. 48-101-503 (giving authority to enforce registration and reporting requirements to the secretary of state) and Tenn. Code Ann. 48-64-103 (requiring notice of dissolution of nonprofit corporations be given to both the attorney general and the secretary of state). 9 The Commonwealth Attorneys Act, Pennsylvania Office of the General Counsel, accessed February 19, 2018, http://www.ogc.pa.gov/about%20us/pages/commonwealthattorneysact.aspx. 10 The Colorado legislature also recently split the regulation of charitable organizations between two offices by revising the Colorado Charitable Solicitations Act in 2001 to require charities that intend to solicit donations from the public to register with the office of the secretary of state (Colo. Rev. Stat. Ann. 6-16-104). 16 B I F U R C A T I O N O F S T A T E R E G U L A T I O N O F C H A R I T I E S
11 Idaho, Montana, Nebraska, and Wyoming are the four unitary jurisdictions that scored a zero on the Solicitation Index, and Arizona is the one bifurcated jurisdiction to score a zero. For a full list of index scores for each jurisdiction examined, please see the appendix. 12 Dr. Dietz is an associate research scholar at the Do Good Institute at the University of Maryland and senior research associate in the Center on Nonprofits and Philanthropy at the Urban Institute, and Putnam Barber is a senior advisor at the Nancy Bell Evans Center on Nonprofits & Philanthropy at the University of Washington. 13 Although our Solicitation Index has various unique qualities, one caveat bears noting: it does not contain information about the capacity of state government offices to enforce laws regarding charitable fundraising. As Lott and colleagues caution, little systematic information exists on the parameters, frequency, consistency, challenges, and benefits of the state regulatory and enforcement structure, in part because multiple agencies within a state or territory may share jurisdiction over the nonprofit sector (2016, 2). 14 The information about the creation of the index presented here is an expanded explanation of the process described in Dietz and colleagues (2017, 187 89). 15 The appendix contains the yes or no values for each jurisdiction for each of the 10 indicators we selected for our final Solicitation Index. We used exploratory data analysis and input from state regulators who reviewed the complete list to identify our final index items. As stated in Dietz and colleagues, almost all of the final index items load onto the first principal component identified in [the] exploratory analysis; our final group of items forms a relatively unidimensional and cohesive (Cronbach s α = 0.850) dimension, and we constructed the index value for each state by simply counting the number of yes entries across the ten items (Dietz et al. 2017, 189). 16 Yes or no responses were not always easy to determine, given the wide variation in how most states approach regulation of charitable solicitation. In some circumstances, we had some careful discussions about whether to indicate that a state required a particular item. 17 1995 N.Y. Sess. Laws Ch. 83 (S. 5336, A. 8063) (McKinney); see also McKinney's Executive Law 172. References Adelstein, Shirley, and Elizabeth T. Boris. 2018. State Regulation of the Charitable Sector: Enforcement, Outreach, Structure, and Staffing. Washington, DC: Urban Institute. Carlson, Bob. 2013. Protection and Regulation of Nonprofits and Charitable Assets. In State Attorneys General: Powers and Responsibilities, edited by Emily Myers, 203 30. Washington, DC: National Association of Attorneys General. Dietz, Nathan, Cindy M. Lott, Putnam Barber, and Mary Shelly. 2017. Exploring the Relationship between State Charitable Solicitation Regulations and Fundraising Performance. Nonprofit Policy Forum 8 (2): 183 204. Fishman, James J. 2015. Who Can Regulate Fraudulent Charitable Solicitation? Pittsburgh Tax Review 13 (1): 16 17. Fremont-Smith, Marion. 2004. Governing Nonprofit Organizations: Federal and State Law and Regulation. Cambridge, MA: Belknap Press. Helge, Terri Lynn. 2009. Policing the Good Guys: Regulation of the Charitable Sector Through a Federal Charity Oversight Board. Cornell Journal of Law and Public Policy 19 (1): 24 25. Lott, Cindy M., and Marion Fremont-Smith. 2017. State Regulatory and Legal Framework. In Nonprofits and Government: Collaboration and Conflict, edited by Elizabeth T. Boris and C. Eugene Steuerle, 163 90. Washington, DC: Urban Institute Press. Mayer, Lloyd Hitoshi. 2016. Fragmented Oversight of Nonprofits in the United States: Does It Work? Can It Work? Chicago-Kent Law Review 91 (3): 937 63. Reiser, Dana Brakman. 2016. Introduction. Chicago-Kent Law Review 91 (3): 843 58. Shipan, Charles R., and Craig Volden. 2012. Policy Diffusion: Seven Lessons for Scholars and Practitioners. Public Administration Review 72 (6): 788 96. B I F U R C A T I O N O F S T A T E R E G U L A T I O N O F C H A R I T I E S 17
About the Authors Cindy M. Lott serves as Academic Program Director for Nonprofit Management Programs at Columbia University s School of Professional Studies and teaches in that program as well. She previously served as executive director and senior counsel to the National State Attorneys General Program at Columbia Law School and within that program was the developer and lead counsel to the Charities Regulation and Oversight Project from 2006 15. Currently, Lott is also a senior fellow at the Center on Nonprofits and Philanthropy at the Urban Institute. She develops and moderates a series of national convenings on state and federal regulation of the charitable sector and is engaged in research regarding regulatory capacity and enforcement at the state level. Mary L. Shelly is currently serving as the Uniform Law Foundation Fellow at the Uniform Law Commission. She also serves as a consultant on the Regulation of the Charitable Sector Project at the Center on Nonprofits and Philanthropy at the Urban Institute. Her research there focuses on charity regulation and on other laws specifically applicable to charities and nonprofits. Nathan Dietz is an associate research scholar at the Do Good Institute at the University of Maryland and a senior research associate at the Center on Nonprofits and Philanthropy at the Urban Institute. He works on several projects related to program evaluation and outcome measurement and helps staff from the National Center for Charitable Statistics with research and analysis. Marcus Gaddy is a research associate in the Urban Institute s Metropolitan Housing and Communities Policy Center. His portfolio includes formative evaluations of dual-generation poverty alleviation strategies and collective impact models, community needs assessment, and performance management and evaluation. Acknowledgments This brief was funded by the Charles Stewart Mott Foundation. We are grateful to them and to all our funders, who make it possible for Urban to advance its mission. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders. Funders do not determine research findings or the insights and recommendations of Urban experts. Further information on the Urban Institute s funding principles is available at urban.org/fundingprinciples. 2100 M Street NW Washington, DC 20037 www.urban.org ABOUT THE URBAN INST ITUTE The nonprofit Urban Institute is a leading research organization dedicated to developing evidence-based insights that improve people s lives and strengthen communities. For 50 years, Urban has been the trusted source for rigorous analysis of complex social and economic issues; strategic advice to policymakers, philanthropists, and practitioners; and new, promising ideas that expand opportunities for all. Our work inspires effective decisions that advance fairness and enhance the well-being of people and places. Copyright March 2018. Urban Institute. Permission is granted for reproduction of this file, with attribution to the Urban Institute. 18 B I F U R C A T I O N O F S T A T E R E G U L A T I O N O F C H A R I T I E S