In 2021, California passed a new set of laws (referred to as AB 488) regulating charitable crowdfunding that go into effect on January 1, 2023. The state’s Department of Justice (DOJ) initially proposed regulations implementing AB 488 in May 2022, but following comments and feedback at a public hearing in July, the DOJ proposed modified regulations on November 21, with a comment period that ended on December 7. There have been substantial revisions. Not surprisingly, the DOJ proposes to delay the effective date of the new and modified regulations to January 1, 2024. Below are some general summaries of the changes in Article 1, Registration, Reporting, and General Supervision of Trustees and Fundraisers (caution: many details and exceptions are not covered here, and the proposed regulations are not law).

Definition of a Charitable Fundraising Platform

Charitable fundraising platform means any person, corporation, unincorporated association or other legal entity that uses the internet to provide an internet website, service, or other platform to persons in this state, and performs, permits, or otherwise enables acts of solicitation to occur, which includes the following and any similar activity:

(A) Lists or references by name one or more recipient charitable organizations to receive donations or grants of recommended donations made by donors who use the platform.

(B) Permits persons who use the platform to solicit donations for or recommend donations to be granted to one or more recipient charitable organizations through peer-to-peer charitable fundraising.

(C) Permits persons who use the platform to select one or more recipient charitable organizations to receive donations or grants of recommended donations made by a platform, platform charity, or other third party person, based on purchases made or other activity performed by persons who use the platform.

(D) Lists or references by name one or more recipient charitable organizations to receive donations or grants of recommended donations made by the platform based on purchases made or other activity performed by persons who use the platform.

(E) Provides to charitable organizations a customizable internet-based website, software as a service, or other platform that allows charitable organizations to solicit or receive donations on or through the platform, including through peer-to-peer charitable fundraising. The customizable platform provided by the charitable fundraising platform does not include the charitable organization’s own platform, but may integrate with the charitable organization’s platform.

Gov. Code Sec. 12599.9(a)(1)

Article 1. Registration, Reporting, and General Supervision of Trustees and Fundraisers

Some Key Definitions

“Consulting charitable fundraising platform” means any person, corporation, unincorporated association or other legal entity that uses the internet to provide an internet website, service, or other platform to persons in this state, and performs, permits or otherwise enables acts of solicitation to occur, as described in Government Code section 12599.9, subdivision (a)(1)(E). “Consulting charitable fundraising platform” includes a charitable fundraising platform that is customizable and enables charitable organizations to solicit donations made to them from donors, including when charitable organizations manage peer-to-peer charitable fundraising campaigns enabled by the charitable fundraising platform. [Oddly, this term is defined but not otherwise referenced in the revised proposed regulations.]

“Coventuring charitable fundraising platform” means any person, corporation, unincorporated association or other legal entity that uses the internet to provide an internet website, service, or other platform to persons in this state, and performs, permits or otherwise enables acts of solicitation to occur, as described in Government Code section 12599.9, subdivision (a)(1)(C) or (D). “Coventuring charitable fundraising platform” includes a charitable fundraising platform that performs solicitations by listing or referencing by name one or more recipient charitable organizations to be sent donated funds based on purchases made or other activity performed by persons who use the platform, including by permitting such platform users to select one or more recipient charitable organizations to be sent donated funds. Donated funds for recipient charitable organizations come from the charitable fundraising platform, or, when platform users can select recipient charitable organizations, from the charitable fundraising platform or other third party persons who are not platform users. [Oddly, this term is defined but not otherwise referenced in the revised proposed regulations.]

“Donated funds” means a donation or grant of a recommended donation, such as when a charitable fundraising platform or platform charity sends a donation or grant of a recommended donation to a recipient charitable organization or alternate charitable organization.

“Fee” means any amount that is charged by a charitable fundraising platform, platform charity, or a vendor that provides services to a charitable fundraising platform or platform charity, for donations or recommended donations made pursuant to the acts of solicitation described in Government Code section 12599.9, subdivision (a)(1) or (5), and deducted from donations or recommended donations. When donations or recommended donations are made, any amount deducted and not passed on to charitable organizations constitutes a fee, and it does not matter if a fee is deducted before or after donated funds are sent to charitable organizations. Examples of a fee include distribution, platform, service, technology, or transaction fees to receive or process a donation, or recommended donation and digital payment processing fees. “Fee” does not include the registration or registration renewal fee imposed by the Attorney General, tips or other amounts requested and added to a donation or recommended donation to cover expenses incurred by a charitable fundraising platform, or amounts paid by an employer to provide a charitable fundraising platform to employees that use the platform to make donations or recommended donations.

“Misuse” means failing to send the full amount of donations or recommended donations, minus fees, to charitable organizations, or incorrectly holding or spending donations or recommended donations before the donated funds are sent to charitable organizations. “Misuse” includes borrowing from or using donations or recommended donations as collateral, or commingling the donations or recommended donations with other funds belonging to a charitable fundraising platform or platform charity.

“Partnership” means a contractual relationship between a charitable fundraising platform and a platform charity, or between two charitable fundraising platforms, where one of the direct or indirect purposes of the contract is to facilitate acts of solicitation on a charitable fundraising platform.

“Peer-to-peer charitable fundraising platform” means any person, corporation, unincorporated association or other legal entity that uses the internet to provide an internet website, service, or other platform to persons in this state, and performs, permits or otherwise enables acts of solicitation to occur, as described in Government Code section 12599.9, subdivision (a)(1)(B). “Peer-to-peer charitable fundraising platform” includes a charitable fundraising platform that permits or enables persons who use the platform to solicit donations or recommended donations made by other platform users for one or more recipient charitable organizations.

“Platform user” means a person who uses a charitable fundraising platform. “Platform user” includes a donor who makes a donation or recommended donation to a charitable organization through use of a charitable fundraising platform, a person who engages in peer-to-peer charitable fundraising through use of a charitable fundraising platform, and a person who makes purchases or performs other activity through use of a charitable fundraising platform that causes donated funds to be sent to a charitable organization.

“Soliciting charitable fundraising platform” means any person, corporation, unincorporated association or other legal entity that uses the internet to provide an internet website, service, or other platform to persons in this state, and performs, permits or otherwise enables acts of solicitation to occur, as described in Government Code section 12599.9, subdivision (a)(1)(A). “Soliciting charitable fundraising platform” includes a charitable fundraising platform that solicits donations or recommended donations from donors who use the platform by listing or referencing by name one or more recipient charitable organizations to be sent donated funds. [Oddly, this term is defined but not otherwise referenced in the revised proposed regulations.]

Registration and Filing Requirements for Charitable Fundraising Platforms (CFPs) and Platform Charities (PCs)

A CFP is subject to (1) an initial registration (Form PL-1) accompanied by a $625 registration fee and (2) an annual registration renewal (Form PL-2) due by January 15 of each applicable year.

A PC must also register and file annual reports. In addition, it must file a notification (Form PL-3) when it enters into a partnership with a CFP to facilitate acts of solicitation on the CFP no later than 30 days after the partnership was entered unless notification was previously provided.

A CFP or PC must file an annual report (Form PL-4) with the Attorney General (AG) on or before July 15 for fundraising activities of the previous year. Certain information that is confidential or a trade secret can be submitted in an attachment to keep it separate from the information available for public inspection. However, the AG can deny this with notification and require an amended Form PL-4.

When a registrant CFP retains a PC or another CFP (“Partner”) to facilitate solicitations performed, permitted, or enabled by the registrant CFP, the registrant CFP’s Form PL-4 may be filed by the Partner, subject to certain conditions.

Good Standing of Charitable Organizations (Charities)

A CFP or PC must not solicit, permit, or otherwise enable solicitations, or receive, hold, control, or send funds from donations or recommended donations, for a Charity on the May Not Operate or Solicit for Charitable Purposes List (“Naughty List”). There is a 10 business day grace period. Good standing can also be determined by a manual search of the AG’s Registry of Charitable Trusts database (“Registry”). If a Charity is not on the Naughty List but is listed as not in good standing on the Registry, a CFP or PC may nonetheless solicit, permit, or otherwise enable solicitations, or receive, hold, control, or send funds from donations or recommended donations for the Charity.

Solicitation Information for CFPs and PCs

A CFP or PC that performs, permits, or otherwise enables acts of solicitation must, before donors can complete a donation, allow donors an option to provide their name and contact information to a recipient charitable organization (“recipient Charity”). This is not required for peer-to-peer charitable fundraising (“P2P Fundraising”), when donated funds are sent to persons engaging in P2P Fundraising, but there are additional requirements that a CFP or PC must follow in such circumstance. Notably, a CFP or PC cannot promise a restriction on a donation unless the recipient Charity has agreed to it in advance.

Consent from Recipient Charities for CFPs and PCs

An agreement between a recipient Charity and a CFP or PC allowing the CFP or PC to use the recipient Charity’s name in a solicitation on the CFP must comply with several requirements, including specification of (1) fees charged by each CFP, PC, or any other partnering vendor, including digital payment processing fees; and (2) the time period for sending donated funds for each CFP. If the CFP is not a 501(c)(3) organization, the agreement must permit the CFP to send a tax donation receipt on behalf of a recipient Charity, whether or not the donor chooses to share their information with the recipient Charity. When a recipient Charity makes a written request for removal, the CFP or PC must verify the request within 3 business days.

Tax Donation Receipts from CFPs and PCs

A CFP or PC that performs, permits, or otherwise enables acts of solicitation must send a tax donation receipt to donors after donations or recommended donations are made no later than 5 business days after a donation is made. When donations or recommended donations are made to a recipient Charity, the CFP must obtain authorization from the recipient Charity to send a tax donation receipt on behalf of the recipient Charity.

Lengths of Time for Sending Donations by CFPs and PCs

A CFP or PC that performs, permits, or otherwise enables acts of solicitation described in (A) or (B) in the definition of a CFP above, must promptly send donations, or grants of recommended donations, in compliance with the regulations, which include a transmittal of donated funds within 30 days or 45 days after the end of the month in which the donations or recommended donations are made, depending on whether the donation is to a consenting recipient Charity, a person engaging in P2P Fundraising, or a non-consenting recipient Charity, unless the recipient Charity is not eligible to be sent the funds. A CFP or PC must determine whether a recipient Charity is eligible within the time period for when donated funds must be sent. If it has been determined that a recipient Charity is not eligible, the CFP or PC must notify donors in writing no later than 30 days after the determination of eligibility, and request them to recommend an alternate charitable organization.

Donors must be given 30 days from the date of written notification to recommend an alternate charitable organization. If an alternate is timely recommended, the CFP or PC must send the donated funds to the alternate charitable organization no later than 30 days after the date an alternate was recommended, unless the CFP or PC determines the alternate is not eligible. If an alternate is timely recommended and determined to be not eligible, the CFP or PC must select another alternate charitable organization, and send donated funds to the alternate selected by the CFP or PC no later than 30 days after donors recommended an alternate. If an alternate is not timely recommended, the CFP or PC must select an alternate charitable organization, and send the donated funds to the alternate no later than 30 days from the last date donors could timely recommend an alternate.

A CFP or PC that performs, permits, or otherwise enables acts of solicitation described in (C) or (D) in the definition of a CFP above, must promptly send donations, or grants of recommended donations, in compliance with all of the following:

(1) When donated funds are not subject to any minimum threshold amounts before they are sent, the donated funds must be sent to a recipient Charity on a quarterly basis or more frequently, unless the recipient Charity is not eligible to be sent the funds.

(2) When donated funds are subject to minimum threshold amounts before they are sent, such minimum threshold amounts cannot exceed $10. Once the minimum amount is reached, the donated funds must be sent to a recipient Charity on a quarterly basis or more frequently, unless the recipient Charity is not eligible to be sent the funds. If the minimum threshold amount is not reached after four consecutive quarters, the donated funds must be sent to a recipient Charity no later than 30 days after the fourth quarter ends, unless the recipient Charity is not eligible to be sent the funds.

(3) A CFP or PC must determine whether a recipient Charity is eligible to be sent donated funds within the time period for when donated funds must be sent. If it has been determined that a recipient Charity is not eligible, the CFP or PC must then select an alternate charitable organization, and send the donated funds to the alternate no later than 30 days after the determination of eligibility.

A CFP that performs, permits, or otherwise enables acts of solicitation described in (E) in the definition of a CFP above, must promptly send donations in compliance with all of the following:

(1) When donations are solicited by and made to a charitable organization, including when charitable organizations manage P2P Fundraising campaigns enabled by the CFP, donations must be sent no later than five business days after the donations are made, unless the charitable organization is not eligible to be sent the funds. A CFP must determine whether a charitable organization is eligible to be sent donations on a monthly basis or more frequently. If it has been determined that a charitable organization is not eligible, the CFP must select an alternate charitable organization, and send the donations to the alternate no later than 30 days after the determination of eligibility.

(2) When donations or recommended donations are made to a CFP or PC, and the CFP also performs, permits, or otherwise enables acts of solicitation described in (A) or (B) in the definition of a CFP above, donated funds must be promptly sent in compliance with the requirement for a CFP or PC that performs, permits, or otherwise enables acts of solicitation described in (A) or (B) in the definition of a CFP above.

A CFP or PC that performs, permits, or otherwise enables acts of solicitation described in the definition of a CFP above, but not described in (A) to (E) of such definition, must promptly send donated funds in compliance with all of the following:

(1) Donated funds for consenting recipient charitable organizations must be sent no later than 30 days after the end of the month in which the donations or recommended donations are made, unless the recipient charitable organization is not eligible to be sent the funds.

(2) A CFP or PC must determine whether a recipient Charity is eligible within the time period for when donated funds must be sent. If it has been determined that a recipient Charity is not eligible, the CFP or PC must notify donors in writing no later than 30 days after the determination of eligibility, and request them to recommend an alternate charitable organization. Donors must be given 30 days from the date of written notification to recommend an alternate charitable organization. If an alternate is timely recommended, the CFP or PC must send the donated funds to the alternate charitable organization no later than 30 days after the date an alternate was recommended, unless the CFP or PC determines the alternate is not eligible. If an alternate is timely recommended and determined to be not eligible, the CFP or PC must select another alternate charitable organization, and send donated funds to the alternate selected by the CFP or PC no later than 30 days after donors recommended an alternate. If an alternate is not timely recommended, the CFP or PC must select an alternate charitable organization, and send the donated funds to the alternate no later than 30 days from the last date donors could timely recommend an alternate.

Information for Charitable Organizations Regarding Donations Sent by CFPs and PCs

A CFP or PC that performs, permits, or otherwise enables acts of solicitation described in (A) or (B) in the definition of a CFP above, must provide, at a minimum, the following information regarding donations, or grants of recommended donations, sent to a recipient Charity:

(1) The legal name of the CFP through which a donation or recommended donation was made.
(2) The total number of donations or recommended donations made.
(3) The time period during which donations or recommended donations were made.
(4) For the donation or grant of a recommended donation that took the longest number of days to send from the date the donation or recommended donation was made, the number of days it took to send. When requested by a recipient Charity, the date each donation or recommended donation was made, and the date each donation or grant of a recommended donation was sent.
(5) For each donation or grant of a recommended donation that was not sent in compliance with the applicable timing regulations, the date each donation or recommended donation was made, and the date each donation or grant of a recommended donation was sent.
(6) The total dollar amount of all donations or recommended donations made before fees were imposed, the total amount of all fees imposed and by whom (broken down for each person or entity that imposed a fee), the total amount of all donations or recommended donations after fees were imposed, and the total amount of all donated funds sent. When requested by a recipient Charity, the amount of each donation or recommended donation before fees were imposed, the amount of the fees imposed and by whom for each donation or recommended donation, the amount of each donation or recommended donation after fees were imposed, and the amount of each of the donated funds sent.
(7) The name and contact information of a donor who chose to share their information, unless a recipient Charity has not given prior written consent for using its name or information in a solicitation. Also provide the total amount donated for each donor who chose to share their information. When requested by a recipient Charity, the amount of each donation or recommended donation for each donor who chose to share their information.
(8) The name and contact information of persons engaging in P2P Fundraising who chose to share their information, when applicable, unless a recipient Charity has not given prior written consent for using its name or information in a solicitation.
(9) When donors or persons engaging in P2P Fundraising restrict or designate a preference as to how donations or recommended donations may be used by a recipient Charity, information on how the funds may be used.

A CFP or PC that performs, permits, or otherwise enables acts of solicitation described in (C) or (D) in the definition of a CFP above, must provide, at a minimum, the following information regarding donations, or grants of recommended donations, sent to a recipient Charity:

(1) A description of the purchasing or other activity performed by persons who use the platform that caused a donation or grant of a recommended donation to be sent to the recipient Charity, along with the time period during which the activity was performed.
(2) The amount of each donation or grant of a recommended donation, with an accounting of how it was calculated, including the number of activities performed, the donation amount per activity, and any fees that were imposed and by whom.

The required information described above in this subsection can be provided with the donated funds, or through a secure website that authenticates the recipient Charity, as long as the recipient Charity is made aware of the website and not charged a fee for website access.

A CFP that performs, permits, or otherwise enables acts of solicitation described in (E) in the definition of a CFP above, must provide, at a minimum, the following information regarding donations sent to a charitable organization:

(1) When donations are solicited by and made to a charitable organization, including when charitable organizations manage P2P Fundraising campaigns enabled by the CFP, provide the date each donation was made by the donor, the date each donation was sent, the amount of each donation before fees were imposed, the amount of the fees imposed and by whom for each donation, the
amount of each donation after fees were imposed, and the amount of each donation sent.
(2) When donations or recommended donations are made to a CFP or PC, and the CFP also performs,
permits, or otherwise enables acts of solicitation described in (A) or (B) in the definition of a CFP above, provide the information required for a CFP or PC that performs, permits, or otherwise enables acts of solicitation described in (A) or (B) in the definition of a CFP above.

A CFP or PC that performs, permits, or otherwise enables acts of solicitation described in the definition of a CFP above, but not described in (A) to (E) of such definition, must promptly send donated funds in compliance with the requirements for a CFP or PC that performs, permits, or otherwise enables acts of solicitation described in (A) or (B) in the definition of a CFP above.

Information for Donors or Persons Regarding Donations Sent by CFPs and PCs

A CFP or PC that performs, permits, or otherwise enables acts of solicitation described in (A) or (B) in the definition of a CFP above, must provide an ability for donors to find out whether their donations or
recommended donations were sent to a recipient Charity, an alternate charitable organization, or a person engaging in P2P Fundraising, when applicable, if donors choose to learn this. Such information must be made available to donors no later than 15 days after the donated funds were sent and, if provided through written notification on a website, no fee can be charged for access.

A CFP or PC that performs, permits, or otherwise enables acts of solicitation described in (C) or (D) in the definition of a CFP above, must provide an ability for persons who use the platform and made purchases or performed other activity that caused donated funds to be sent, to find out whether the donated funds were sent to a recipient Charity or an alternate charitable organization, if platform users choose to learn this. Such information must be made available to platform users no later than 15 days after the donated funds were sent.

Handling of Donations by Persons Engaging in Peer-to-Peer Charitable Fundraising

When persons engaged in P2P Fundraising are sent donated funds from a CFP or PC that performs, permits, or otherwise enables acts of solicitation described in (B) in the definition of a CFP above, these persons must not divert or misuse the donated funds, and must send the donated funds to the recipient Charities referenced in solicitations no later than 5 business days after receipt.