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The following guidelines provide background information on the most common types of filings and the related exemptions in Alabama.
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This state generally requires organizations to register prior to soliciting for donations. However, the registration requirement has a religious exemption. Religious organizations must apply to receive the exemption - it is not automatic.
This state has a broad definition of what constitutes solicitation and does not specify what minimum activity level triggers registration requirements.
However, organizations which: (1) do not receive more than $25,000 in total contributions annually, and (2) do not use a paid solicitor are exempt from registration. The statute does not state that whether the total contribution calculation is for Alabama- source contributions or gross contributions received, regardless of origin.
In this state, organizations that are required to register have the option of registering through the Unified Registration Statement, which is a standardized charitable registration accepted in many states. Using the URS, rather than a state-specific registration form, has pros and cons. The URS typically must be submitted by mail. Alabama has an online filing system, and using that system may be more efficient than completing and mailing the URS manually.
Additionally, creating the online profile will save the organization time in preparing future annual reports, which are processed using the same system.
Some states require organizations to appoint a “registered agent” in the state as part of the organization’s charitable registration. This state does not currently have this requirement.
This state does not require organizations to post specific language when conducting charitable solicitations unless the organization is working with a professional fundraiser.
Depending on the type and volume of activities an organization has in this state, the organization may also need to register as an out-of-state business (sometimes called a “foreign business”) with the secretary of state or another state agency.
These foreign business registration requirements are separate from the charitable registration. Not every out-of-state organization needs to register. An attorney can assist the organization in determining whether its connections with this state are significant enough to require foreign business registration. Examples of activities that might require registration include having employees physically located in the state, conducting programs in the state, and having an office in the state.
In this state, organizations that have received recognition of federal income tax exemption under IRC Sec. 501(c)(3) are automatically exempt from state income tax. Some organizations may choose to send a copy of their IRS determination letter to the state department of revenue to indicate the organization’s position that it qualifies for the exemption. Note that, although an organization may be exempt, if it has unrelated business taxable income (UBTI) that is subject to federal taxation, that UBTI also may be subject to state income tax. (Ala. Code § 40-18-32.)
In this state, business entities pay an annual Business Privilege Tax. Entities operated exclusively for religious purposes are exempt from this tax.
It is also important to consider whether your organization might be eligible for sales and use tax or property tax exemption. In this state, federal Section 501(c)(3) status does not automatically provide an exemption from sales, use and property taxes. More information about the application is available on the Alabama Department of Revenue website and in Alabama administrative rules. An accountant or attorney can provide answers to specific questions regarding your organization’s eligibility for exemption.
This resource contains general educational information related to legal concepts, but this information does not constitute legal advice. Anyone seeking legal advice is strongly encouraged to consult with a licensed attorney regarding any of the matters discussed herein. Although licensed attorneys work with Napa Legal, Napa Legal is not a law firm and does not undertake legal representation on behalf of any clients. Further, no licensed attorney working with or on behalf of Napa Legal agrees to undertake legal representation on behalf of any client unless the terms of such representation are set forth in a separate, written representation agreement.
