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Nonprofit Requirements for Filing a License to Solicit in Other States, and Handling Contributions in a Foreign Currency

CPAs & Business Consultants

Jessica Rolfe
Jessica Rolfe, CPA CPAs & Business Consultants

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Nonprofit board members in attendance at Yeo & Yeo’s nonprofit board training inquired about the requirements for filing a license to solicit in other states when using Facebook as well as how to handle donations that are given in foreign currencies. Continue reading to learn the answers to these questions and more.

1. When should Licenses to Solicit be filed in other states?

The AICPA provides guidance in its Compliance Brief, “Compliance with Charitable Solicitation Laws.” It addresses when an organization must register to solicit. Unfortunately, each state is different, so you have to look up the state in question (the state government’s website) to see what is required.

A question was also asked about Facebook solicitations and out-of-state United Way donations and their impact on registering in other states. In regards to Facebook, if the solicitations are general requests out to the public, the nonprofit should probably be registered in Michigan. If the nonprofit starts routinely receiving donations from other states, then it may want to consider registration in those states. However, Facebook solicitations do not generate the need for registration in every state.

There isn’t a clear-cut answer in regards to out-of-state United Way donations. If the donation comes through an out-of-state United Way, the nonprofit might be able to argue that the corporate office of the donation origination is in Michigan, if this is the case. Depending on what the nonprofit is doing to try to solicit those donations, they may be able to argue that they are not requesting the money and therefore registration isn’t needed. Again, it also comes back to the different requirements in each state.

2. How should a nonprofit value a contribution or pledge receivable that is given in a foreign currency?

On the date the contribution receivable is recorded, it must be converted from the foreign currency to U.S. dollars using the exchange rate. At each balance sheet date, the nonprofit must take the remaining balance in the foreign currency and convert it to U.S. dollars. The gain or loss is considered “foreign currency transaction gains and losses” on the statement of activities (income statement). When the cash is ultimately received, the difference between the balance sheet amount and the U.S. dollar amount received is also recorded as “foreign currency transaction gains and losses.”

If it is a long-term contribution receivable, then you will also have to factor in the discount rate. We suggest keeping the amortization schedule in the foreign currency to ensure the right amounts are classified between the “discount” and “foreign currency transaction gains and losses” on the books when the conversion is done for the balance sheet.

 

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