Charitable organizations often rely heavily on donors for support. While most nonprofits exist to further a legitimate purpose, there are unscrupulous charities that prey on unsuspecting donors in Maryland. While state and federal laws provide strict formation and registration processes for businesses that solicit donations, you may also take steps to ensure that your money will be used responsibility and according to your intentions.
Nonprofit vs. Charity
Not all nonprofit organizations are created or operated the same. In fact, in Maryland, to be a nonprofit means only that a business is created with a goal other than generating a profit. Its members and employees, while not allowed to be paid dividends, are still entitled to reasonable compensation for their services. This means that the nonprofit need not be created to further a charitable purpose. However, in order to solicit donations and receive preferential tax treatment, Maryland law requires that the nonprofit be a charitable organization. If you are being solicited by a nonprofit that does not further a charitable mission, that is one indication that the business might not be legitimate.
If you have been contacted by an organization requesting a donation, you should check to see if the charity has registered with the Maryland Secretary of State's office. State law requires all nonprofits that solicit donations to register, which must be done in advance of making any requests for funds, and the registration must be renewed on a yearly basis. The secretary of state's office maintains a searchable database for information regarding every registered charity through its website. If the charity in question does not show up in the search result, it could be a sign that it is operating illegally.
Another method of determining the legitimacy of a charity is to find out whether it has received a tax-exempt designation from the IRS. This is referred to as 501(c)(3) status, and organizations that promote a charitable mission generally qualify, provided that all filing requirements are observed. The benefit to this designation from a potential donors perspective is the ability to deduct amounts you donate from income taxes on your federal return. You may determine whether the charity in question has received 501(c)(3) status through the searchable database on the IRS website.
You may also check on the reputation of any charity through the Better Business Bureau. The BBB offers a searchable database for charities through its website, and rates those charities according to a grading system that is based on how honest and trustworthy the company's business practices are. A rating of A+ is the best possible grade, and any grade below a C indicates that the charity does not have a good track record. In addition, some websites, including Scambusters.org, and Hoax-Slayer.com, offer information regarding the legitimacy of Internet-based charities and email-based solicitation activities. These sites can help you avoid becoming the victim of fraud.