Common Mistakes to Avoid

Dear Filer,

As the authorized officer or registered agent of an organization registered to solicit contributions in Colorado, you may recall that the organization is required to update its registration statement and file a financial form with the Secretary of State’s Charities Registration Program annually.  This is in addition to the requirement to file a periodic report with the Business Organizations Program. 

Each of these filings is examined by program staff and may be rejected for certain deficiencies.  We appreciate that time spent making these corrections is time that could be spent more productively pursuing your organization’s charitable purposes, so we are providing information about common mistakes that will help ensure you have your document approved the first time it is filed.  The chart below illustrates the eight most common reasons for rejecting a filed document, followed by a brief description of how to complete that section correctly.

 

Table showing a bar graph with the top eight reasons for rejection. In order, from highest to lowest: Address-related errors, inconsistencies in tab-deductability, revenue and expense items missing, balance sheet information missing, missing officer, directors, trustees, etc., wrong reporting year, and amendment filed but a renewal is due.

 

Bad Address

Our filings require a street address for the organization’s principal office, registered agent, and custodian of financial records.  In addition, please note that the registered agent must be located in Colorado.  A P.O. Box or other mailing address may be entered in addition to a street address, but it cannot substitute for one, not even in mountain and rural communities.  Please contact program staff prior to filing a document, if providing a street address is not possible or presents genuine concerns about personal safety.

 

Tax-Deductibility of Donations

 The next most common reason for rejecting a filing involves inconsistent answers about the tax-deductibility of contributions to the organization.  In one question, the form simply asks if donations to the organization are tax-deductible for the donor.  This question often trips up new or very small organizations, but generally speaking, only organizations tax-exempt under section 501(c)(3) of the Internal Revenue Code are eligible to receive tax-deductible donations.

It is possible, though not common, for an organization to be exempt under 501(c)(3) without applying for a determination letter from the IRS. It is also possible for a 501(c)(3) organization to apply for a determination letter up to 27 months after the date of its formation and still have donations to it be tax-deductible retroactively to the date of formation.

Later the form asks if the organization solicited any donations there were not tax-deductible, and if so, whether the organization expressly provided a statement to that effect to donors.  You just want these answers to be consistent.  For example, you should not indicate that donations are not tax-deductible in one place and then state that the organization has never solicited a donation that is not tax-deductible in another place.

 

Professional Fundraising Fees

There are two types of mistakes commonly made in this section:

  • An organization lists the name of a paid solicitor or professional fundraising consultant on its registration in Step 8, yet enters $0.00 in professional fundraiser fees paid in Step 9.  If a name is listed in Step 8, staff will expect to see some amount for professional fundraising fees in Step 9(unless the only name listed is a commercial co-venturer).  Note that any professional fundraiser’s name listed in the previous reporting period will be carried over to the current reporting period by default, so, if the organization did not contract with that fundraiser or consultant in the current period and indeed paid $0.00 in professional fundraising fees, you will need to delete those names in Step 8.

  • The organization lists some amount of professional fundraising fees paid in Step 9, but it does not name a paid solicitor or professional fundraising consultant in Step 8.  If there is an amount listed for professional fundraising fees, there should be at least one paid solicitor or professional fundraising consultant named as well.

 

No Revenue or Expenses Listed

Another frequent reason for rejecting a document is failure to list any revenue and expense items on the financial statement.  However, it would be unusual for this to be an accurate depiction of the financial activity of the organization, if the organization indeed had $0.00 in revenue and $0.00 in expenses, or estimates it will have $0.00 in revenue and $0.00 in expenses, please send an explanatory email to charitable@sos.state.co.us prior to filing the document. 

 

Balance Sheet Information

 It is extremely rare for an organization to have $0.00 in assets at the end of a reporting period.  However, if this is the case, please send an explanatory email to charitable@sos.state.co.us prior to filing the document.  Note that staff routinely compare balance sheet information from the previous reporting period to revenues and expenses and balance sheet information in the current period, so please confirm that the current period’s information is consistent with what was reported in the previous period.

 

Missing Officers, Directors, Trustees, or Executive Personnel

The law requires that each and every individual be listed on the registration statement. This does not include strictly advisory boards, but it does include every person on the governing board of directors. "Executive Personnel" includes senior management like the executive director, development director, chief financial officer, chief operating officer, etc.

 

Reporting Year Incorrect

This involves organizations registering for the first time that have been subject to registration under the Colorado Charitable Solicitations Act (6-16-104 C.R.S.) in previous years.  In such cases, the Secretary of State’s policy is to require the organization to file retroactively for at least two years, so the initial registration will need to cover the fiscal year prior to the most recently concluded fiscal year, and once that is approved, the organization will file a registration renewal for the next year.  If financial information for the second year is not available, the organization files an extension request instead of a renewal by selecting "File a Document" and then "File an Extension."

 

Amendment Filed But Renewal Is Due

An "Amendment" is used to make additions or corrections to the most recently approved registration statement, but it does not advance the reporting period to the next fiscal year. To update the registration and provide financial information for the next fiscal year, you need to file a "Renewal," not an "Amendment."  There is one wrinkle that involves organizations that filed estimated financial information with their initial registration.  In that situation, the organization files an Amendment to replace the estimated financial information with actual financial information and checks the box to indicate the information is now actual, not estimated.  In all subsequent years, it will need to file a Renewal.

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