Christian LeFer creates solutions to benefit the nonprofit sector. His passion has always been to empower others to impact their world: “Unleash your inner hero!”
His family’s involvement in the community and as advocates for foster and adoptive parenting, along with a successful consultancy in founding and fundraising for nonprofits, make this foray into software and solutions for charities a natural.
Having organized successful 1st Amendment litigation in state and federal courts, Christian has also become a sought-after adviser on free speech and civil liberties issues.
LeFer’s key strengths include vision, copywriting, marketing (direct and online), and sales. I earned a B.A. from Rutgers University in History/Political Science, cum laude.
What is Charitable Solicitation Registration/Fundraising Compliance?
A: 41 out of 50 U.S. states have enacted regulations requiring “charitable solicitation” registration – covering virtually every conceivable method of fundraising activity by nonprofits. The registration process varies by state, and depends on factors including annual revenues and method of fundraising – creating a confusing patchwork of regulations.
State government agencies including Attorneys General and Secretaries of State have staffed compliance enforcement departments with prosecutors and Administrative Law judges, and a finding of non-compliance can result in monetary fines, civil or criminal penalties, and revocation of the right to raise funds.
These laws no longer only apply to large-scale phone and mail fundraising: A passive website “donate” button or social media “share” can result in your organization being targeted and penalized – even publicly listed as an “offender” online.
The Interview Transcript
Hugh Ballou: Greetings for another version of The Nonprofit Exchange. This is Hugh Ballou and-
Christian LeFer: Christian LeFer.
Hugh: And Russell Dennis with you as co-hosts. Christian, as you’ve heard, is our guest today. We are dealing with a topic that might be invisible to lots of nonprofits. I’m sure that it is. So Christian has a couple of entities we are going to talk about. Russell, how are you doing today?
Russell Dennis: It’s another fine day here in Colorado. It’s great to connect with my neighbor Christian in Denver, who has got something if you’re a new nonprofit or if you’ve been around for a while, this is something you absolutely have to have.
Hugh: We are going to ask him some questions. Christian, watch out, Russell has the hard questions. Christian, welcome to The Nonprofit Exchange. Let’s start out with you telling people just a little bit about yourself and how you came to do what you’re doing now.
Christian: Absolutely. Hugh and Russell, it’s an honor to be here. The way this got started like many movements in history is a little bit of moral outrage was involved. I am a foster and adoptive parent, so I have dealt with nonprofits later in my life. My sister is developmentally disabled, so at a young age, I had a fair amount of exposure to things like the Special Olympics, etc. Back around 2008/2009, I volunteered to help a few friends and be involved with a project to get a 501(c)3 up and running. Like many things I looked at in life, I thought, how hard can that be? I can take the application, and you guys can do some of the other things.
I had some questions, as it is a fairly opaque project, and I couldn’t get ahold of my agent. I was told by the front desk of the IRS that it would take a year to get approved for your 501(c)3. I couldn’t find any reliable information. I was faced with this moral problem where if I wanted to start a used car lot, it’s $50 and 20 minutes on the Secretary of State’s website. If I wanted to help feed hungry kids and do something good in the world, it was going to be thousands of dollars and a year of torture trying to figure this process out. There is a funny story I won’t go on about, but I basically cold-called into every extension of the IRS. I made extensions up north and south of that one phone number they gave me for that particular agent, and I grilled IRS agents until I thought I had learned every problem they ran into on these files. I volunteered to do this a couple more times, and I got 30-day and 60-day approvals in face of an average one-year approval delay. From there, I thought maybe I would have something that would help other people.
Hugh: That’s awesome. I wonder if one of those people you talked to was Russell Dennis.
Christian: Maybe. I was pretty persistent.
Hugh: What I have learned in the short time we have known each other is that you are a no-quit person. You are committed to your vision, and you are not going to stop. I have learned that about you. You are focused and passionate and tenacious about it. What successful people do is what other people aren’t willing to do. In a short period of time, I’ve seen that leadership trait in you.
We want to talk about two entities you own, and they serve nonprofits. This is not a sales webinar, and we want to talk about the value and the experience you bring to nonprofits.
Christian, you have a domain. It’s all under one company, but I want to talk about these specific initiatives that you have. That story you just told, a lot of people don’t start their own nonprofit because they think it’s too expensive and too troublesome. You have a site called Instant Nonprofit. Why did you start that, and what do you help people do there?
Christian: If you are familiar with Intuit—as a matter of fact, most people probably aren’t familiar with Intuit—that is the company that owns TurboTax and QuickBooks. When you think of the names, they evoke exactly what those products do. It’s the same thing with InstantNonprofit.com and FundraisingCompliance.com. Those go to the appropriate product pages for the stage of your nonprofit. We are here to serve the entire nonprofit life cycle.
InstantNonprofit.com has a simple service whereby you can sign up in minutes, and once you
it’s a three-step process, and it’s very simple. Step one, just like TurboTax, you would enter the information, and we would translate it from IRS-speak to English. Very simple process. You can get through that very quickly. 30-60 minutes in most cases. Give us everything our staff needs to go from an idea to an IRS-approved 501(c)3.
Once you get out of step one and into step two, your incorporation, an EIN, obtainment, which is the same as a tax ID, the process is immediately moved forward, and the staff files the incorporation, so you get your EIN. Technically, once you have those two items, you are officially in business.
I’ll make this quick, but the reason you can be officially in business and even get tax-deductible donations at that point is as long as you complete the IRS approval process
follows within 27 months. The IRS official policy is to backdate the date of tax-exempt status to the date of incorporation. Once we file the EIN and get the incorporation process going, most dates take 10 days to get that back to us.
The next step is we create what we call the IRS package. It goes beyond the 1023 application. Like many government processes, it’s not just the application, but ancillary documents that need to be followed along with that application to be valid and go all the way through the process without a hitch. Those are things like we provide your bylaws, we provide conflict of interest policy, compensation policy, and even some ancillary documents that might not go to the IRS but would help you run your nonprofit, such as your official board resolutions authorizing all of this activity and a board minutes Word template that allows you to record your board minutes. We want people to succeed, and we don’t think you should have to search around looking for your basic documents you need to run your organization. We even provide a memo for organizations to give to their prospective donors early on that explains this IRS policy so someone can write you a check today ahead of getting the IRS letter.
Once that is all complete and we send it back to the customer for approval, mostly last names, spelling errors, and omissions—we have all the IRS red flags taken care of at this point—and you get your own concierge through this whole process in case something is missing or maybe there is a contradiction somewhere. Once we have steered you around all those potential barriers at the IRS, we send you the package, the customer approves it, and we move onto step three.
At that time, we collect the IRS filing fee, and we submit that package to the IRS with that incorporation that has then come back from the state. 95% of our files don’t get any additional follow-up questions from the IRS. But if they do ask any additional questions or request any additional information, we also guide that process through. We are here to help you succeed, not just provide a service.
Hugh: That is a whole lot of steps and a whole lot of attention to detail. I can realize there is a real challenge for the IRS to screen out the people interested in fraud or money laundering. We hear that in the news all the time. I imagine it’s their due diligence that really protects us all, so I can understand they need that level of detail. But most people don’t know that. Do you ever have people come to you who tried it on their own and got stuck, and you have to help them refine it and resubmit it? Is that an option that happens for you?
Christian: While I won’t mention competitors by name—let’s generically call them Rocket Zoom—sometimes we get customers who have tried other companies and get stuck because they were sold a package that sounded like a complete nonprofit package, but it only included the nonprofit entity formation, the incorporation. Or they gave a lawyer money and that lawyer ran out of hours before they completed the job. Or they simply just got stuck in board meetings because the IRS has publicly put out in the past that this takes 50-100 hours. We reduce that to an hour or two of most people’s time.
We do the IRS’s job for them in part. We help screen out the organizations that are simply not performing an exempt activity, which is the definition that renders an entity eligible to be a 501(c)3. We also remove any of the contradictions or problems where they don’t have the appropriate number of board members or whatever it is prior to submitting to the IRS. The IRS agent that gets our file is pretty happy to do so. It’s why we get lightning-fast approvals. Our record is nine days from the phone call from the customer to an IRS letter in their mailbox. I am not promising that that happens for every customer. It shows we have this process very dialed, and we want people to serve their mission and not get stuck in the bureaucracy.
Hugh: I imagine you have created some points with the IRS. What about people who have tried it on their own? They didn’t hire a service; they did it on their own and got stuck in a royal mess.
Christian: There are two main buckets those would fall into. One would be they have some ideas and some things written down, mission statement, etc., but haven’t submitted anything. The other is someone who has submitted something at some point along the way. Either they have an EIN, which they had from another business, so those cannot be repurposed. Or they have filed an incorporation, but maybe they filed an LLC instead of a nonprofit corporation. In those cases, we don’t charge any additional to file the proper entity and move forward through the process. If they just have stuff written down on paper, we help draw that into a very easy process so they don’t need to worry about the big enchilada. All they need to do is take that next bite of the elephant.
Hugh: I want to move onto the topic of the day. It’s helpful to have that foundation because a lot of people are intimidated by that process.
I file and I go through the process sand get my approval letter. I’m in business. Well, not yet. What Russell and I do in SynerVision is help people build strategy. You have a board, but they don’t function until we learn how to lead the board. We provide that systematic stuff. Building your board, building your skill, defining your sources of revenue. There is a thing that people skip over. And it’s filing with your state for compliance. What is compliance? What does that mean?
Christian: What most states call this in their legal or statutes is charitable solicitation registration requirements. That is a mouthful. So we just call that fundraising compliance. What that means is 41 states out of the 50, including Washington D.C., have regulations around being allowed to fundraise to their residents in their state. You have to file to be permitted to approach any of their residents in their state. Back in the old days, that meant something pretty simple because you weren’t reaching any people outside of your geographic area unless you were doing direct mail or cold calling, typical outbound activities. Now we live in a whole different world that the law is often not prepared for because everyone’s Donate button appears in every state just by nature of the Internet and ubiquitous connectivity. It’s created a real dilemma for nonprofits, but there is a double side to that coin. Can’t we use technology to lower the cost and hassle of being complaint in all 41 states? Our company is here to offer that.
Hugh: I looked at some of those requirements, and they vary widely from state to state. Some of them are quite intimidating. Some of them cost money, and some of them don’t. Just going forward, Karen Frank on our webinar asked, “Are churches affected by compliance?” Do churches have to file as well?
Christian: The very founding of this country involved people of faith. Churches have some special treatment wherein they don’t need to file even for a 501(c)3 technically to be allowed to take those donations. However, many churches do file for a 501(c)3 because it makes it easier to provide a verifiable receipt for a tax deduction for people who give money to it. It’s the same thing with state legislation regarding charitable solicitation requirements or fundraising compliance. Many or most states will exempt churches, but ministries today and the faith community today, there are probably many times the number of ministries that have all kinds of purposes and activities that aren’t churches per se. You can get an exemption being a church, but that is a very specific narrow definition by the IRS. Churches are often exempt, but it does not cover the majority of ministries.
Hugh: That is a good answer. I am going to ask you something about compliance. As you were talking about the setup of the nonprofit, you talked about your bylaws and the template for your minutes. There is another kind of compliance, which is recording the official actions in your corporate record book. I think a lot of charities don’t do that. You have your minutes, you have contracts you sign, you have resolutions your board has approved, and those all need to go into your official record book. That is one kind of compliance, which if you ever have an audit or a lawsuit, people would go to that source document to see if you had permission to do what you’re really doing.
We are talking about a different kind of compliance here. This is the compliance for fundraising. It varies a whole lot from state to state. What about the states that don’t require it? Is there any kind of action needed in those nine states that don’t require it?
Christian: In those states, direct mail, online, social media, all those things are not regulated under charitable fundraising. But the interesting thing in the 41 states that do regulate, pretty much every manner you could possibly find a way to fundraise are regulated and do trigger those fundraising requirements. We get calls every day asking, “I only get donations in these 25 states. I am doing social media, but we are getting up and running.” Technically, any way that someone can possibly find a way to have a Donate button, it does not need to be a direct appeal, triggers those fundraising requirements.
What I was going to say about your issue with complying with basic corporate governance, which you are the expert on and I’d love to turn this interview around someday and ask you some of these questions, but the board materials, the resolutions, those kinds of things, generally stay inside the organization and only come out if someone wants to look into those. Those aren’t really filed with a government entity.
Fundraising compliance and charitable solicitation requirements, same thing, what’s happened now is that governments are leveraging technology so that it’s not only a requirement so something bad can happen or a penalty can occur
. Opportunity for a nonprofit. Donors are now searching publicly available databases in these states to see if your organization is in that database. If they are, then they understand you are a best practices organization, and they will feel better about making a donation to your organization. These fundraising regulations forcing you to file in those states can actually be turned around and allow you to project a more transparent and best practices high quality feel for your organization, which is becoming more and more important.
Hugh: We have covered what it is to be registered for fundraising compliance and who needs to be registered. What happens if you don’t register?
Christian: If you don’t register, and let’s use that example of the proverbial lady from Albuquerque types your name in to the New Mexico charitable database, and your organization is not there. That may prompt a phone call to the regulating body, whether that is the attorney general in some states or the secretary of state. An inquiry might be made as to whether you are conducting these fundraising activities in their state. Lo and behold, a social Donate button or any other activity, including events, can trigger either a cease and desist letter from a regulator or an inquiry to answer questions sent to your organization: Are you conducting these activities? Do you have any donors? It can open up a whole can of worms for an organization. The best thing to do is get out in front of these and register in the states you certainly have activity and donors in, but ideally across the country. That is how that works. There can be penalties up to $10,000 for the first offense. New York can be very tough on organizations for example.
Hugh: I’ll make this handout [available]. There is a PDF you have about compliance. You have a map of the country. One person asked, “What are the nine states?” It looks like it’s Arizona, Idaho, Montana, Wyoming, South Dakota, North Dakota, Iowa, Indiana, and Vermont. Is that right?
Christian: That sounds right. I try to keep my geography as straight as I can.
Hugh: They are all very cold, except for Arizona, which is very hot.
Christian: It’s very rare that a state repeals a regulation on business or nonprofits. Arizona did have the law and repealed it not that long ago.
Hugh: Russell has the perfect head. You and I have hair; he has the perfect head. He has a lot of brain underneath that perfect head.
What are your observations? What probing question do you have for our guest?
Russell: I am in the right lighting here today because I have fuzz both on top and under the chin that is gray, but you can’t see that here in this lighting. Always make use of your background.
I think that more and more, there is an opportunity or a probability that you will see a state go and look at whether a charity is registered or not than the federal government. A lot of it is due to attrition or shortfalls or changes in personnel, but states are up against it for revenue. They are seeing there is an opportunity here. You really want to be in compliance. I agree that while the application is really complicated, the information that comes out of that and the information that comes out of I-90s, which are the tax returns, are really great opportunities to do some marketing and talking about the work you are doing. It shows up on sites like Guide Star and Charity Navigator, who build profiles.
Before Christian’s product, I had seen one application that covered maybe 34 states. It was a common registration. That was as close as anything came to being able to register. Now there is an all-in-one tool. I think it’s fantastic to have that and simplify the process and be able to answer questions that talk about what you’re doing that are compliant. It’s great to have somebody doing the work and asking all the right questions to streamline the process. I’m really excited about what you’ve got here. It’s unique. There is nothing like it out there. I think it’s really important for nonprofits to do this. If you’re registered, more people can see you.
The thought that really came to mind as we talked about this was the filing fees that come with some states versus others. I know that you can help people with registration. What kind of investment is somebody going to be looking at to get that full national registration? Is there a number that you have with the fees involved? Or is that something that people can step into in phases?
Christian: I just want to mention quickly that you mentioned there was a common registration form that covered a number of states. That has now been rendered defunct for all intents and purposes. It was a great idea because, as I felt starting this whole thing, and now we have stakeholders and staff serving a lot of people out there, it shouldn’t be hard to do good is essentially our core proposition. I thought it was great to see that form come out. When you have 41 different states, they are constantly tweaking their requirements, raising or lowering their threshold, etc. It is an extremely complicated maze of regulations to determine where a nonprofit that raises $50,000 a year or $5,000 a year versus a million a year. Do they have outside fundraising counsel? There are all kinds of complications. The URS has been pretty much rendered not relevant anymore, but it was a great attempt. Obviously, to create one set of applications on our system and have 41 states go out and be registered is where technology has enabled us to go.
As far as the fees, I know we have the lowest cost and the highest value product out there. It’s $130 per state. At a certain point, when you get almost to the maximum number of states, we do have a discount. It’s about $4,895 to register for all of the states. It depends on there from the level of revenue the organization has. What we do for very small organizations is we get them exemptions in as many states because that eliminates the filing fee. I wish I could make it hard and fast and just have a few columns with rules on how this works, but there are as many combinations on how this could work as there are stars in the galaxy. What I would say is that you’d probably start at about $1,000. Maybe $25 per state on average. But if we can get you out of that altogether, that is absolutely what we’ll do.
What confronts some organizations in this process is they say $5,000 is a lot of money. We estimate we are about 1/3 of the top-flight attorneys, the big firms that do this for a lot of organizations, we are probably about 40% of that cost. There is still a lot of attention that needs to be paid by humans to make sure the agencies are complying with their own rules and getting this done. What we do is we will go by number of states to start, and we will dial in an exact amount for filing fees prior to the actual filing for the customer.
Hugh: Christian, I think it’s important to have integrity to say that SynerVision is offering both of your programs through our portal, both the incorporation piece and this compliance piece. We do have a business relationship. I wanted to clear that up. We are offering it because we believe it’s high value and a big missing component, both the difficulty in setting up your nonprofit and having programs to help them track money, and then you help them stay out of jail or keep them from paying fines.
We have some people actively listening who have questions. I am assuming we are talking about continental United States and territories, right?
Christian: Yes. What’s interesting is we as a company recommend having someone on U.S. soil on the board, someone who is a U.S. citizen or at least has a U.S. tax ID number here, just partly for simplicity. The IRS does not actually require that on the board. You can have all foreign nationals here, but we do recommend having at least one American national on the board.
The entity does need to be formed out of one of the U.S. states. What we often do is we have organizations that are doing great work overseas, and what they simply do is contact us, establish the beachhead here, file in whatever state they prefer (sometimes it’s Washington D.C. if they want that international profile), and move forward from there and get them that tax-exempt status from the IRS. [Audio interruption] As we know, the U.S. has a high charitable donation base here, and that can be used effectively to help these foreign nonprofits who have a sister relationship with an organization in another country. What I find is that it’s more regulated over there often to take American money than it is here.
Hugh: Absolutely. There is a lot of higher standards and regulations in many other countries. I do have clients who have an American-based 501(c)3, and they have one based in another country. They have to keep that accounting straight, and they have to do all the compliance in America because they are raising money in America. All the stuff you’re talking about is for American companies. Foreign laws apply to those who are out of the country.
Mark Morris: Suppose you’re coming into a pre-existing organization, and you want to find out if this organization is registered, and in which states? How do you find out?
Christian: There are a couple different ways. Russell mentioned Guide Star earlier. That is another advantage of being compliant across these states. Guide Star has these best practices tiers. Gold, platinum, etc. Guide Star, as one of its vetting processes there, determines whether the organization is registered and compliant with various laws. That is one way to see.
The other way is good old-fashioned, hop on the phone, or in the states where they have a publicly searchable database, look for your organization of concern. You can search for anything. Search for those organizations in that state to determine its compliance status.
If this is something where we are picking up a new organization, we can help with some of these types of things in doing what we call a free compliance check. We want to help organizations understand the implication for their organization. If you go to FundraisingCompliance.com, you can sign up for a free compliance check.
Hugh: Oh really? Is that with you?
Christian: Not with me personally, but with one of our able staff and client specialists.
Hugh: Somebody asked a question. I wasn’t sure what they meant, but I’m guessing: How do you convince your board members that you don’t need an attorney to do this?
Christian: Probably by setting up a compliance conversation, a free consult, and providing for example the handout you have there. It explains very simply this is not a legal procedure. It’s quasi-legal or default legal because people simply can’t find someone else to do it that would be adept at complying with the letter of the law.
What we have found is attorneys are actually using our services to both form 501(c)3s and get their clients compliant because for the amount of time they could spend, what lawyers really should be doing is providing counsel to their clients on how to reduce liability and achieve their strategic objectives, not necessarily filing paperwork and applications. We specialize in this in a way that gets a much faster result.
Because you don’t have to rely on a court for success, there is an objective way to know we are successful at this. This is why we only get ten stars out of ten for Better Business Bureau or five out of five, not even a 4.9, on Facebook. The reason is there is an objective standard, and that is the letter from the governing agency. You will get a letter from Washington D.C, New Jersey, whatever state entity, or the IRS definitively saying you are in fact a 501(c)3 tax-exempt organization, and that you are compliant with all the fundraising regulations in that state. The proof is in the pudding. This is not something that requires lawyers to do things like go into court or contest things because there is such a simple objective standard. It’s pretty complicated, but our sole job is to do this one set of operations, which is get nonprofits over these bureaucratic hurdles so they can achieve their mission.
Hugh: Yes. That is the bottom line. We really want to cut through all this confusion. It’s a lot of work. People just want to do good, like you said. It shouldn’t be hard, but we realize there are some protections that need to be in place to protect this entity. It is a privilege to have something that is tax-exempt, and we want to do our part to make sure we preserve the integrity because we all contribute to that.
Christian: Let me add quickly that we do have attorneys we consult with regularly that are part of our staff, our resources that we have here. If there is any gray area or a question that a customer has that might be outside the norm, while our specialists do this day in and day out—it’s all they do, and they are not jamming this in between a divorce and a real estate deal—I am not denigrating attorneys. They are often stuck not being able to have a full-time legal career doing nothing but nonprofit work. When you mix lots of different things in, it’s hard to become an absolute expert at this one thing.
But in the cases where we do have a question that the nonprofit specialist thinks is ambiguous or there might be a conflict, we go directly to one of our attorneys who practices before the bar in at least one state, I believe two, and only does nonprofit work. We do have those legal resources so we are 100% sure that every file that goes out the door is for a legally tax-exempt, compliant organization. In fact, we have 100% approval rating, partly because of our prescreening, and partly because there has never been a situation where we have not been able to resolve and square that circle and help the customer. Sometimes people come and they have something they want to do that is more suited for a for-profit, but they have exempt activities over here. We will counsel them to go start a for-profit corporation if necessary while we take care of their nonprofit.
Hugh: That is really helpful, Christian. There are lots of nuances. People come up with exceptions. This person has a question about a for-profit entity and a nonprofit entity around real estate and elder care. There are some nuances to that. Rather than getting on a specific challenge there, let’s ask a generic question. I’d like to connect you with that person via email later.
If you have a for-profit entity, and you found another entity which is your tax-exempt organization, are there any particular flags you need to watch out for when you have two entities like that?
Christian: Absolutely. It can be as simple as someone wants to make it. What we generally recommend is the IRS wants to watch out for what is called a captured or connected entity. It is important to have completely distinct bank accounts. You should have a completely distinct entity and tax ID, or EIN. There should be a distinct decision-making process.
Many organizations, Habitat for Humanity, our local chapter here, there may be heavy involvement by a particular construction company locally. They may even have several people from that construction company on the board or involved in the decisions of Habitat for Humanity. That decision-making process does need to be separate and distinct. You want to have enough sunshine brought into that process so that no one can ever be accused of comingling funds or doing anything that the IRS defines as inuring benefit to an individual or corporation. All that means is is this nonprofit unfairly benefiting someone by steering building contracts or something like that, or is there a bidding process? Has there been some minimal activity done by the board of the nonprofit to say that even if we are going to work with this construction company that wants to give us discounted materials or labor, has there been a process where we are ascertaining we are getting these services and products for at or below market value so that nobody is unduly becoming enriched by those activities? That is pretty simple if you put those things in place. That is spelled out in the conflict of interest policy and compensation policies that we provide with our service.
As it gets more complicated, I would turn them to someone like Hugh Ballou who helps boards use best practices to keep themselves on the straight and narrow. In this world of forced transparency with the Internet, secrets will come out, and you don’t want to have unresolved, open loops out there.
Hugh: That is helpful. That is the reason you have an active board of people who have experts, and it is probably a good idea to have an attorney who is on your board as a volunteer who can help steer you with these best practices from a legal standpoint, and a CPA from the accounting standpoint.
Russell asked you about the cost for the compliance piece. There are 50 states. $5,000. That is less than $100 a state. That is reasonable because there is a fair amount of work in that. Is that an annual fee? Once you register, do you have to register again, or is that once and done?
Christian: That is a very important distinction. The formation process, getting a 501(c)3, you only do that one time. You incorporate one time, and then you file for an IRS tax-exempt status one time if you don’t let it lapse. From year to year, you get the 990 tax return for lack of a better term and your annual report. The 990 doesn’t cost anything. As you grow, you might have to have a bookkeeper or CPA prepare the 990. But when you’re small, when you’re below $50,000 per year, the amount of information the IRS gets on the 990 is very minimal. They used to call it the post part. The annual report is maybe $20.
When you move onto the compliance side, that is a recurring cost. That is why we advertise or talk about saving organizations $70,000 over ten years. Our service is less than half of what an attorney might charge. Those are recurring costs. What we do with smaller nonprofits is we help them block and tackle their way to compliance status. Maybe taking the five states that have the most enforcement risk or the five or ten states where their donors reside or they have staff and operations. We will weigh a few factors and provide a nonprofit with a road map that is commensurate of the level of activity they have, and frankly the funding they have. You can tell someone all day long they have to go get their headlight that is out on their car repaired, but if they don’t get paid until Friday, the best thing for them to do is not speed.
Hugh: Or drive at night.
Hugh: You have to file every year.
Hugh: There is different prices for different states, I would imagine?
Christian: It’s $130 per state across the board. We try to keep things very simple because if you present too many variables, it stops people from decision making.
Hugh: There is a filing fee with some states over and above that?
Christian: Correct. Some states, as you said, is a zero fee. New York, which is a very regulated state, has a fairly low fee of $25. States have various fees. On the other end of the spectrum, in both complexity and cost, Hawaii is fairly low-cost filing if you are a small organization, but they continue to scale that up. Instead of saying if you are above $50,000 or above $500,000 or whatever, Hawaii scales up to a fairly high fee for organizations that are doing say $5 million. But there are only a couple of states that scale along with the amount of revenue.
Hugh: I believe Virginia has a $100 filing fee and a multi-page form that looks scary.
Christian: Florida is a nightmare. Imagine filing for a 501(c)3 41 times.
Hugh: Oh my word.
Russell, what are you thinking here?
Russell: I’m thinking this is very good. A lot of my information is outdated. This solves a lot of problems on a lot of levels. By having someone work with you, which can become prohibitively expensive, you have somebody who goes through this process with you and can take every state on a case by case basis. It saves you money and keeps you in compliance. It’s really important to have all of this marketing information down and to make sure you don’t run into any trouble with the conflict of interest. Making sure that everything that you do, and this is why I talk about having CPAs and attorneys. If you have for-profit and social profit entities and just a group of places where your revenue is coming from, all of your transactions are what you call arms’ length. It will be something somebody in the general market would do. If you can keep those things in balance, you are going to be fine there because a lot of nonprofits have what we call unrelated business revenue as well as mission-based business revenue. A lot of conversations you can have.
On the subject of having attorneys to file it, the IRS process, they have counsel put all of these questions together, and they wanted to make sure that they covered all the bases around federal statutes to make sure that once those questions were answered satisfactorily, somebody would be in compliance. You don’t necessarily need an attorney to put it together, but it helps to have somebody knowledgeable.
This is a unique platform. I have never seen anything like this before that actually asks the questions in English. If you go out there and start looking at instructions, it gets really fun. Take it from me. I had 70,000 pages of code to read through on the job, and it’s clear as mud from time to time. If you can simplify this, it’s an investment, not an expense. From an investment perspective, I hadn’t seen anything better.
Christian: I appreciate it. We want to solve people’s problems. People who want to do good in the world, we want to help solve their problems. It was a real epiphany for me. Who likes bureaucracy? No one. But what if we could show a little love to the person who is at the IRS, like you were, or the state agency who gets messy files every day, and we actually, when we started all of this, we called our packages “A love letter to a bureaucrat.” If we can make their day better and make them smile and say, “Wow, somebody cared about what I have to do at this thankless desk job,” taking extra special care, and that is why our customers get such rapid results and why our communications with these agencies are appreciated. We are helping make their job easier as well as the customer. If we can all go around spreading that kind of attitude in the world, I think we’d all get along a lot better.
Hugh: We are approaching the end of our interview time. I want to ask you one question, and then I want to give you a chance to do a closing tip. What is regulated? What kind of funding activities are regulated?
Christian: That’s a great question. Any conceivable manner that would result in a donation, this could be swag you’re selling, a program fee for an event you have, maybe you are Tweeting things out, “Hey, look at the kids we served with clean water in Africa or right in our backyard. Sign up here.” All of those means—electronic, offline, direct mail, phones, and even quite indirect types of fundraising like corporate collaborations where you are at the supermarket and the chocolate bars have a doggy and kitty on it. All of those types of things are actually regulatable activities from a fundraising perspective. It’s important to recognize that because these things have gone to court at this point. These have been reviewed and revised by legislators. When they have come down and decided where to split things, it’s come pretty much to sweep up all types of fundraising activity.
Hugh: Christian, I am going to put the link in the podcast copy and into the website so that people can click on it for the compliance. Again, we offer this through SynerVision because we know it’s a value to our tribe. We don’t have people on here who are snake salesmen; we have bona fide people of integrity who have really good value to give.
Russell, this has been a good interview, hasn’t it?
Russell: This has been fantastic. There is nothing like up-to-date compliance and having the tools available so that you can focus on your good work. You can really invest a lot of time in being compliant and getting registered, and that takes a lot of energy. It can literally suck the oxygen out of the board room. This is a simple solution and a reasonable investment that keeps you up-to-date and compliant so that you can focus on doing the important work that you’re doing, which is changing lives out there in the community. Thank you, Christian for all that you do. I will talk more about this in the future because it’s a product whose time has come.
Christian: Thank you.
Hugh: Christian, take us out. What is your parting tip or thought you want to leave with the listeners?
Christian: Here is a parting tip that is exciting because we don’t want to just look at spending more money from a nonprofit or even investing in compliance, which can be very positive. These feel like costs. What is really exciting is if you look at it from the donor perspective. If you were to take your list of your top donors for your organization and give them a call and say two things, “We are interested in being a best practices organization, and we’d like to know what that means to you,” and let that donor speak. Then ask the donor the reason they first gave to your organization, and let them recall what it was that emotionally connected them to your organization. You will not have the problem of compliance costing you. You will actually have it come back to you many times over because you are being responsive to the concerns of the donor, which more and more all the time, they want to make sure they are giving money to the right organizations. That means they care, and that means they are doing the right things, including compliance and feeding back to that donor what you’re doing is great. How often are donors actually asked what it was in their heart that caused them to give in the first place? If you do that, you can triple your fundraising and raise a million dollars. I used to raise millions from a very small list, and I remember how important that was. I hope that helps.
Hugh: Awesome. Christian, thank you so much for sharing your time and resources with people.
Christian: Thank you. I really appreciate both of you. Have a wonderful day.