Online Compendium of NPO Regulations

Online Compendium of Federal and State Regulations for U.S. Nonprofit Organizations

NPO Regulations: A Glossary

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Some of the terms here are specifically defined in state statutes and therefore the exact definition may vary between states. For this reason, it is critical to consult the appropriate state code when determining matters of law. If a term listed here is defined in either the Model Solicitations Act (1986) or the Model Nonprofit Corporation Act (1987), then that definition is generally given here. However, not all states have necessarily based their law on those models and most have altered the models in some ways.

Terms included in the definitions of this glossary that are themselves defined elsewhere in the glossary are italicized and linked to their own definitions. Links that are not italicized lead to other Web pages. Terms that are numbers appear at the place they would be if spelled out.

Some additional dictionaries are:

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A

Articles of Incorporation
A legal document that creates specific type of organization, a corporation, under the laws of a particular state. State law prescribes specific statements that must be included in Articles of Incorporation, and nonprofit corporations in particular must include certain provisions in order to qualify as nonprofit under state law. Furthermore, in order to obtain federal tax-exempt status, certain provisions must be included either in a nonprofit organization's Articles of Incorporation or its Bylaws.

B

Back-End Premium
A term used to describe a (generally) low cost item that is sent by charitable soliciting organizations to donors as a modest form of thanks. See also front-end premium.
Board of Directors
See Board of Trustees.
Board of Trustees
Also termed the "Board of Directors." In a nonprofit corporation, the Board of Trustees represents the interests of the general public or the specific public group that the organization was established to serve.
Business
An organization established for generating profit. A commercial organization.
Bylaws
A legal document stating certain self-imposed rules adopted for the regulation of an organization's own actions. Since it is a required element when forming a corporation, Bylaws are a form of agreement or contract between the corporation and its owners to conduct itself in a certain way. While for a commercial business the owners are its shareholders, the ownership of a nonprofit corporation belongs to the public as represented by the NPO's Board of Trustees and the government.

C

Case law
The body of written law established through judicial decisions, instead of legislative action (which establishes statutory law).
Certificate of Authority
A license issued by a state's Secretary of State giving permission for a foreign corporation to operate in that state. This license is required before operating a business establishment or otherwise engaging in commerce in that state, such as hiring that state's residents as employees. However, some activities that are conducted in a state by a commercial or nonprofit organization may not constitute sufficient presence (called "nexus") in that state to require a Certificate of Authority.
Charitable organization
In the Model Solicitations Act (1986), "Charitable organization" means:
"(1) Any person determined by the Internal Revenue Service to be a tax exempt organization pursuant to section 501(c)(3) of the Internal Revenue Code; or
(2) Any person who is or holds himself out to be established for any benevolent, educational, philanthropic, humane, scientific, patriotic, social welfare or advocacy, public health, environmental conservation, civic or other eleemosynary purpose or for the benefit of law enforcement personnel, firefighters, or other persons who protect the public safety, or any person who in any manner employs a charitable appeal as the basis of any solicitation or an appeal which has a tendency to suggest there is a charitable purpose to any such solicitation."
Charitable purpose
In the Model Solicitations Act (1986), "charitable purpose" means:
(1) Any purpose described in Internal Revenue Code section 501(c)(3); or
(2) Any benevolent, educational, philanthropic, humane, scientific, patriotic, social welfare or advocacy, public health, environmental conservation, civic or other eleemosynary objective, or an objective that benefits law enforcement personnel, firefighters, or other persons who protect the public safety."
Charitable sales promotion
In the Model Solicitations Act (1986), "charitable sales promotion" means "an advertising or sales campaign, conducted by a commercial co-venturer, which represents that the purchase or use of goods or services offered by the commercial co-venturer will benefit, in whole or in part, a charitable organization or purpose."
Charitable solicitation
See solicitation.
Charity, Charitable
Some common meanings of "charity" are, (1) benevolent goodwill toward or love of humanity, (2) lenient judgment of others, (3) generosity and helpfulness especially toward the needy or suffering; also aid given to those in need, (4) public provision for the relief of the needy, (5) an institution engaged in relief of the poor, (6) a gift for public benevolent purposes, or an institution founded by such a gift. See also charitable organization and charitable purpose.
Commercial, Commerce, Commodity
Occupied with or engaged in commerce or work intended for commerce. Commerce is the exchange, buying, or selling of commodities. A commodity is an economic good, or something useful or valued. However, when used in law with regard to nonprofit organizations, "commerce" is specifically considered to be engaged in for the purpose of creating profit.
Commercial organization
See business.
Commercial co-venturer, coventurer
In the Model Solicitations Act (1986) "commercial co-venturer" means a "person who for profit is regularly and primarily engaged in trade or commerce other than in connection with soliciting for charitable organizations or purposes and who conducts a charitable sales promotion." Sometimes a law will simply refer to a "coventurer" with the same meaning.

A compilation of state definitions of the term "commercial co-venturer" and related terms is available at this site.

Common law
Unwritten law primarily based on custom, but also sometimes referring to a system of law originating in England.
Compensation
Something that constitutes an equivalent or recompense. A reward for services rendered. Compensation may be monetary (in cash or cash equivalents) or non-monetary (in property or intangible benefits). Also see consideration.
Consideration
The inducement, price or motive that causes a party to enter into an agreement or contract. Also see compensation.
Contribution
In the Model Solicitations Act (1986), "contribution" means "the grant, promise or pledge of money, credit, property, financial assistance or other thing of any kind or value in response to a solicitation. It does not include bona fide fees, dues or assessments paid by members, provided that membership is not conferred solely as consideration for making a contribution in response to a solicitation."
Corporation
A form of legal entity created under state law. This entity is treated much like an individual under law, and therefore the term "person" in law usually means both individuals and corporations. Corporations are governed by their Articles of Incorporation and Bylaws.
Counsel
An advisor, often a legal or financial advisor. A counsel does not usually perform the actions that are advised himself or herself, which are instead performed by the person or organization that the advisor serves. See also fundraising counsel.

D

Domestic corporation
A corporation that was established in the jurisdiction being considered. For instance, a nonprofit corporation incorporated in New York is a domestic corporation with respect to New York state laws. However, it is a foreign corporation with respect to the laws of every other state.
Donation
See contribution.

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Eleemosynary
Charitable. Of, relating to, or supported by charity.

F

501(c)(3)
That section of the Internal Revenue Code defining certain tax-exempt, nonprofit organizations. These organizations are specifically established for religious, charitable, educational, literary or scientific purposes.
Front-End Premium
A (generally) low-cost item sent with a charitable solicitation as an inducement to a potential donor, but which the recipient gets to keep regardless. See also back-end premium.
Foreign corporation
A corporation that was established outside of the jurisdiction under consideration. For instance, a nonprofit organization incorporated in New York is a foreign corporation with respect to Ohio state law, but is a domestic corporation with respect to New York law.
Fundraising consultant
In the North Carolina General Statutes Section 131F-2(10), "fund-raising consultant" means "any person who meets all of the following:
a. Is retained by a charitable organization or sponsor for a fixed fee or rate under a written agreement to plan, manage, conduct, consult, or prepare material for the solicitation of contributions in this State.
b. Does not solicit contributions or employ, procure, or engage any person to solicit contributions.
c. Does not at any time have custody or control of contributions."
A key component of this definition is item (c), which distinguishes it from the definition of "fundraising counsel" given in the Model Solicitations Act (1986), as a person who does not solicit contributions but may have custody or control of the contributions at some point. Typically, the regulatory burden is less for a person who doesn't ever have custody or control of contributions. A person who either conducts the solicitation or has custody or control of contributions at any time is typically defined as a professional solicitor rather than a fundraising consultant.

A compilation of state definitions of the term "fundraising consultant" and related terms is available at this site.

Fundraising counsel
In the Model Solicitations Act (1986), "Fund raising counsel" means a "person who for compensation plans, manages, advises, consults, or prepares material for, or with respect to, the solicitation in this state of contributions for a charitable organization, but who does not solicit contributions and who does not employ, procure, or engage any compensated person to solicit contributions. No lawyer, investment counselor or banker who advises a person to make a contribution shall be deemed, as a result of such advice, to be a fund raising counsel. A bona fide salaried officer, employee or volunteer of a charitable organization shall not be deemed to be a fund raising counsel."

Typically, the regulatory burden is less for a person who doesn't actually conduct the solicitation but only advises the nonprofit organization. Note, however, that the Model Solicitations Act (1986) did not specify that a fundraising counsel never has custody or control of the contributions. Accordingly, some states have added such a requirement to their definition of this role, sometimes renaming it to fundraising consultant.

A compilation of state definitions of the term "fundraising consultant" and related terms is available at this site.

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HTML-format
An electronic file format that represents text and graphical material primarily through a hierarchical structure rather than any particular layout for presentation. HTML-format is the primary method for encoding World Wide Web pages. Because HTML-format documents generally don't specify the precise layout of the page, they appear differently when presented by different display mechanisms. For instance, pages may be automatically and dynamically reformatted to fit within a display box if that box is adjusted in size. Furthermore, because HTML-format files are composed only of text (with independent images embedded by the display software), they are very compact and easily used with automatic text searching mechanisms. The ability to present fill-out forms in HTML-format that are easily processed by widely available and inexpensive Web server software provides a simple means for electronic submission of data. These characteristics all contrast with those for PDF-format.

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Internal Revenue Code
Section 26 of the United States Code, which is administered by the Internal Revenue Service.
Internal Revenue Service, IRS
The executive branch agency of the U.S. government that carries out the functions described by Section 26 (Internal Revenue) of the United States Code. The agency that collects federal taxes on personal and corporate income and some other revenue. This agency maintains a Web site.

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Jurisdiction
The authority of a sovereign power to govern or legislate. The power or right to exercise authority. The limits or territory within which authority may be exercised.

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Model Solicitations Act (1986)
A model law developed by the National Association of Attorneys General, the National Association of State Charity Officials, and the Private Sector Advisory Group and completed in 1986. The full title of the document is "A Model Act Concerning the Solicitation of Funds for Charitable Purposes." The Model Act was subsequently adopted by many states, but some portions were later ruled unconstitutional by the Supreme Court. A complete copy of the Model Act is available online.

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National Association of Attorneys General, NAAG
The National Association of Attorneys General (NAAG) was founded to facilitate interaction among Attorneys General as peers, and to facilitate the enhanced performance of Attorneys General and their staffs. The Associationís 56 members are the Attorneys General of the 50 states and the chief legal officers of the District of Columbia (Corporation Counsel), the Commonwealths of Puerto Rico (Secretary of Justice) and the Northern Mariana Islands, and the territories of American Samoa, Guam, and the Virgin Islands. The U.S. Attorney General is an honorary member. This organization maintains a Web site.
Nexus
The condition of having sufficient presence in a jurisdiction to be subject to specific laws of that jurisdiction. For instance, in order to be subject to the taxing authority of a state, a person or organization must have sufficient presence in that state, usually established by operating a business or otherwise engaging in commerce there. The degree of presence and the associated specific conditions necessary for a nexus to be formed is typically established by statutory and case law.
Nonprofit
Not conducted or maintained for the purpose of making a profit.
Nonprofit organization, Nonprofit corporation, NPO
An organization in which no owner, stockholder or trustee shares in profits and losses, and which exists not to earn revenue but to promote a mission that typically (but not necessarily) enhances the public welfare. These organizations are often eligible for tax-exempt status, but not all nonprofit organizations are tax-exempt, nor can contributions to all nonprofit organizations be treated as deductions for income tax purposes.

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Paid solicitor
See professional solicitor.
PDF-format
An electronic file format that represents text and graphical material independent of the particular display system, presenting a layout and style identical or nearly identical to the corresponding printed paper version. PDF-format is the format most commonly used by the IRS to publish forms online. PDF-format can be used either to display pages by constructing them from their component parts (i.e. text, lines, images, etc), or by simply presenting the scanned image of that page. The former method is much more compact and may be used with automated text searching mechanisms, but is much more labor intensive to create if starting from a printed page. PDF-format contrasts with HTML-format, which may be presented differently depending on the display mechanism. Another key difference is that while fill-out forms may be composed in PDF-format, online software that can process completed forms in this format are neither common nor inexpensive.

PDF-format has been deemed acceptable in proposed IRS regulations for Internet publication of tax-returns and Applications for Exemption for tax-exempt organizations.

Person
In legal meaning, a "person" may be an individual, a corporation, or some other entity created according to law. The Model Solicitations Act (1986), defines "person" as "an individual, corporation, association, partnership, trust, foundation or any other entity however styled."
Professional solicitor
Also termed a "paid solicitor" or sometimes just "solicitor." A professional solicitor is distinguished from a fundraising consultant or fundraising counsel by having greater control of the fundraising operation, typically including conducting the solicitation itself and/or having custody or control of contributions at some time.

Under the Model Solicitations Act (1986), "paid solicitor" means "a person who for compensation performs for a charitable organization any service in connection with which contributions are, or will be, solicited in this state by such compensated person or by any compensated person he employs, procures, or engages, directly or indirectly to solicit. No lawyer, investment counselor or banker who advises a person to make a charitable contribution shall be deemed, as the result of such advice, to be a paid solicitor. A bona fide salaried officer employee or volunteer of a charitable organization shall not be deemed to be a paid solicitor."

As another example, in the North Carolina General Statutes Section 131F-2(10), "solicitor" means "any person who, for compensation, does not qualify as a fund-raising consultant and does either of the following:

a. Performs any service, including the employment or engagement of
other persons or services, to solicit contributions for a charitable
organization or sponsor.
b. Plans, conducts, manages, consults, whether directly or indirectly,
in connection with the solicitation of contributions for a charitable
organization or sponsor."
A compilation of state definitions of the term "professional solicitor" and related terms is available at this site.
Profit
The excess of returns over expenditure in a transaction or series of transactions.

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Secretary of State
The leader of an executive-branch government agency that usually is responsible for recordation duties. For instance, when establishing a corporation, Articles of Incorporation are typically filed with the Secretary of State for the state in which the corporation is established.
Social welfare
Organized public or private social services for the assistance of disadvantaged groups.
Solicitation, Solicit, Soliciting
Also "charitable solicitation." In the Model Solicitations Act (1986), "Solicit" and "solicitation" mean "the request directly or indirectly for money, credit, property, financial assistance, or other thing of any kind or value on the plea or representation that such money, credit, property, financial assistance, or other thing of any kind or value, or any portion thereof, will be used for a charitable purpose or benefit a charitable organization. Without limiting the scope of the foregoing, these words shall include the following methods of requesting or securing such money, credit, property, financial assistance or other thing of value:
(1) Any oral or written request;
(2) the making of any announcement to the press, over the radio or television or by telephone or telegraph concerning an appeal or campaign by or for any charitable organization or purpose;
(3) the distribution, circulation, posting or publishing of any handbill, written advertisement or other publication which directly or by implication seeks to obtain public support;
(4) the sale of, offer or attempt to sell, any advertisement, advertising space, book, card, tag, coupon, device, magazine, membership, merchandise, subscription, flower, ticket, candy, cookies or other tangible item in connection with which any appeal is made for any charitable organization or purpose, or where the name of any charitable organization is used or referred to in any such appeal as an inducement or reason for making any such sale, or when or where in connection with any such sale, any statement is made that the whole or any part of the proceeds from any such sale will be used for any charitable purpose or benefit any charitable organization.
A solicitation shall be deemed to have taken place whether or not the person making the same receives any contribution."

A compilation of state definitions of the term "solicit" and related terms is available at this site.

Solicitor
For purposes of NPO law, a person or organization that solicits charitable donations (contributions). In some state laws, "solicitor" has the same or a similar meaning as professional solicitor.
Standardized Registration Kit
See Uniform Registration Statement.
Statutory law
The body of written law established by enactments expressing the will of legislature, in contrast to common law or case law.

T

Tax-exempt
A term usually used to mean exempt from state or federal corporate income taxes, e.g. a tax-exempt nonprofit organization. However, organizations that are exempt from state or federal corporate income taxes are not usually exempt from all taxes.

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Uniform Registration Statement, URS
A form contained in the Standardized Registration Kit, which is accepted by most states that require registration of nonprofit organizations conducting charitable solicitations within their jurisdiction, in lieu of each state's own form for this purpose. Some states that will accept the URS require certain supplementary information provided through additional forms included in the Kit. The Standardized Registration Kit, which is sponsored by the National Association of Attorneys General (NAAG) and the National Association of State Charities Officials (NASCO), is available online or in printed form from any of several distributors.
United States Code, USC
A consolidation and codification of the general and permanent laws of the United States arranged by subject under 50 titles, the first six dealing with general or political subjects, and the other 44 alphabetically arranged from agriculture to war. The United States Code is updated annually, and available for online search or download. Commonly abbreviated as U.S. Code, U.S.C. or USC.

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Main page | Legal basis for regulation | Tax-exempt status | Registration for soliciting | Charitable solicitations | Financial accounting | Other issues | Easing the burden | Glossary | Resources by state

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Page last updated 04Jun99

Online Compendium of Federal and State Regulations for U.S. Nonprofit Organizations

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