Fundraising Regulations for Illinois Nonprofits
Fundraising is essential to the survival and growth of most nonprofit organizations. Whether a nonprofit relies on individual donations, grants, special events, or online campaigns, Illinois law imposes specific requirements designed to protect donors and ensure transparency in charitable solicitations. Nonprofits that fail to comply with these regulations risk fines, loss of good standing, and enforcement actions by the Illinois Attorney General.
This article provides an overview of the primary fundraising regulations that apply to Illinois nonprofits and explains how organizations can remain compliant while carrying out their charitable missions. Contact MacDonald, Lee & Senechalle, Ltd., for tailored advice and representation from a dedicated team of experienced Chicago church and nonprofit attorneys.
The Legal Framework Governing Charitable Fundraising in Illinois
Charitable fundraising in Illinois is primarily regulated by the Illinois Attorney General, acting through the Charitable Trust Bureau. The Attorney General’s authority arises from several statutes, most notably the Solicitation for Charity Act (225 ILCS 460) and the Charitable Trust Act (760 ILCS 55). These laws are intended to ensure that charitable assets are used for their intended purposes and that donors receive truthful information when deciding whether to contribute.
In addition to these statutes, nonprofit corporations are governed by the General Not For Profit Corporation Act of 1986 (805 ILCS 105), which establishes baseline governance rules, fiduciary duties of directors and officers, and reporting obligations. While this Act does not focus exclusively on fundraising, it provides the corporate framework within which fundraising activities occur.
Registration Requirements Before Soliciting Donations
Most Illinois nonprofits must register with the Attorney General’s Charitable Trust Bureau before soliciting or receiving charitable contributions. Registration is required for organizations that hold charitable assets or that solicit donations from Illinois residents, regardless of whether the solicitation occurs in person, by mail, online, or through social media.
Initial registration generally involves filing organizational documents, including Articles of Incorporation and bylaws, along with financial information and a registration statement. Registration must be completed before fundraising begins, not after donations are received. Certain organizations, such as religious organizations and some educational institutions, may be exempt from registration, but these exemptions are narrowly construed and should be confirmed carefully. Even religious organizations must submit an initial registration filing (Form CO-1) and a religious exemption request (Form CO-3) so the Attorney General can determine whether they qualify for an exemption from ongoing financial reporting. Religious organizations may be excused from filing annual financial reports with the Charitable Trust Bureau, but this exemption is not automatic and must be requested and approved in writing.
Failure to register before soliciting donations can expose a nonprofit to enforcement action by the Attorney General, including penalties and orders to cease fundraising activities.
Ongoing Reporting and Annual Filings
Once registered, most nonprofits must file annual financial reports with the Charitable Trust Bureau. These reports typically include financial statements and copies of the organization’s federal IRS Form 990, 990‑EZ, 990-N, or 990‑PF. The purpose of annual reporting is to provide transparency regarding how donated funds are used and to allow regulators and the public to evaluate the organization’s financial stewardship.
Annual financial reports are due on a schedule set by the Attorney General, often aligned with the organization’s fiscal year. Late or incomplete filings can result in late fees, loss of good standing, and potential suspension of fundraising privileges in Illinois.
Disclosure Requirements in Charitable Solicitations
Illinois law requires nonprofits to provide truthful and non-misleading information when soliciting donations. Under the Solicitation for Charity Act, solicitations must not contain false statements, omit material facts, or misrepresent how contributions will be used.
Written solicitations, including emails and online fundraising pages, often must include the nonprofit’s legal name and sufficient identifying information to allow donors to verify the organization’s registration status. When professional fundraisers or fundraising consultants are involved, additional disclosures may be required to clarify the relationship between the fundraiser and the charity.
Misrepresentation during fundraising is one of the most common triggers for enforcement actions by the Attorney General and can seriously damage a nonprofit’s credibility.
Use of Professional Fundraisers and Fundraising Counsel
Illinois law draws important distinctions between nonprofit organizations, professional fundraisers, and fundraising consultants. A professional fundraiser is generally someone who, for compensation, solicits donations on behalf of a charity and has custody or control of the contributions. A fundraising consultant, by contrast, may plan or advise on fundraising campaigns but does not directly solicit or handle donations.
Professional fundraisers are subject to their own registration and bonding requirements under the Solicitation for Charity Act. Nonprofits that engage professional fundraisers must ensure that those fundraisers are properly registered with the Attorney General and that written contracts are in place. Copies of these contracts may need to be filed with the Charitable Trust Bureau.
Nonprofits remain responsible for compliance even when fundraising activities are outsourced. Hiring a third party does not shield an organization from liability if fundraising laws are violated.
Special Fundraising Activities: Raffles, Bingo, and Gaming
Many nonprofits raise funds through raffles, bingo games, or similar events. These activities are regulated separately from general charitable solicitations. Raffles and poker runs are governed by the Illinois Raffles and Poker Runs Act (230 ILCS 15), while bingo games are regulated under the Bingo License and Tax Act (230 ILCS 25).
To conduct a raffle legally, an eligible nonprofit must obtain a raffle license from the appropriate local authority, typically the municipality or county clerk. There are strict rules regarding ticket sales, prize disclosures, and use of proceeds. Conducting a raffle without proper licensing can result in fines and criminal penalties.
Other gaming activities, such as pull tabs and jar games, are subject to their own licensing statutes as well.
Because gaming laws are technical and strictly enforced, nonprofits should seek legal guidance before planning any fundraising event involving chance or prizes.
Online and Interstate Fundraising Considerations
Modern fundraising frequently occurs online, allowing Illinois nonprofits to reach donors across state lines. While Illinois registration is required for soliciting Illinois residents, nonprofits that solicit donations nationwide may also need to consider the charitable solicitation laws of other states. Many states require registration before soliciting their residents, even if the nonprofit is based elsewhere.
Illinois nonprofits that engage in online fundraising should also ensure that their websites and donation platforms comply with Illinois disclosure requirements and do not contain misleading statements. Transparency is particularly important in online campaigns, where donors may have limited context about the organization.
Fiduciary Duties and Proper Use of Funds
Directors and officers of Illinois nonprofits owe fiduciary duties of care and loyalty to the organization. These duties extend to fundraising activities and the use of donated funds. Charitable assets must be used consistently with the organization’s stated mission and any donor restrictions.
Misuse or diversion of charitable funds can trigger investigations under the Charitable Trust Act and may result in personal liability for directors or officers. Maintaining accurate records, adopting internal controls, and ensuring board oversight of fundraising practices are critical compliance measures.
Enforcement and Penalties for Noncompliance
The Illinois Attorney General has broad authority to investigate suspected violations of charitable fundraising laws. Enforcement actions may include subpoenas, audits, injunctions, monetary penalties, and orders prohibiting further solicitation until compliance is restored.
In serious cases involving fraud or intentional misconduct, additional civil or criminal consequences may apply. Beyond legal penalties, enforcement actions can severely harm a nonprofit’s reputation and undermine donor trust.
Best Practices for Illinois Nonprofits
To minimize risk, Illinois nonprofits should treat fundraising compliance as an ongoing responsibility rather than a one-time task. This includes registering before soliciting donations, filing annual financial reports on time, reviewing solicitation materials for accuracy, monitoring third-party fundraisers, and maintaining clear financial records. Periodic legal review of fundraising practices can help identify issues before they become enforcement problems.
Serving Churches and Nonprofits Throughout the Greater Chicagoland Area
Fundraising regulations for Illinois nonprofits are designed to protect donors, ensure transparency, and preserve the integrity of charitable organizations. While the regulatory framework may seem complex, compliance is achievable with careful planning and attention to legal requirements. Understanding registration obligations, disclosure rules, reporting duties, and special event regulations is essential for any nonprofit that relies on public support.
At MacDonald, Lee & Senechalle, Ltd., we assist nonprofit organizations throughout Illinois with fundraising compliance, governance, and regulatory matters. If your organization has questions about charitable solicitations, registration, or enforcement risk, experienced legal counsel can help you navigate these requirements while staying focused on your mission. Contact us today to discuss your needs and goals and find out how we can help.
