What You’ll Learn
If you’re a nonprofit in Virginia, or you’re a nonprofit considering fundraising or other activities in Virginia, you must understand the requirements that Virginia has established for nonprofits operating in the state.
How can you become familiar with these laws? Where should you start?
Start here. This state profile includes the basic requirements nonprofits must consider. Reading the profile and implementing appropriate compliance measures will help you prepare your organization for success in Virginia.
Getting to Know the State Nonprofit Corporation Law
*Important primarily for nonprofits incorporated in Virginia
Emma Woodhouse, handsome, clever, and rich, with a comfortable home and happy disposition, seemed to unite some of the best blessings of existence; and had lived nearly twenty-one years in the world with very little to distress or vex her. She was the youngest of the two daughters of a most affectionate, indulgent father; and had, in consequence of her sister’s marriage, been mistress of his house from a very early period. Her mother had died too long ago for her to have more than an indistinct remembrance of her caresses; and her place had been supplied by an excellent woman as governess, who had fallen little short of a mother in affection.
- Emma, Jane Austen
When reading a novel, we get to know a fictional character by the author’s description. The author tells us about the character’s appearance, purpose, actions, mannerisms, and values.
Nonprofit corporations are something like fictional characters.
We learn how a nonprofit will look and act and make decisions not by reading a novel, but by reading the state law (called the nonprofit corporation act) and the rules the nonprofit makes for itself (called the bylaws and articles of incorporation). The law and the organization’s own rules tell us the organization’s name, purpose, way of acting, and method of making decisions.
To get to know your own nonprofit, be sure to review the sections below.
State Nonprofit Corporation Law
For Religious Nonprofits
Nonprofit Religious Corporation Act: Virginia’s nonprofit corporation law lacks: (a) specific provisions permitting the formation of nonprofit religious corporations; (b) specific protections for religious exercise at faith-based organizations, and (c) express acknowledgement of an option for nonprofits to incorporate for religious purposes. Confused about what it means to be a religious nonprofit corporation? See our whitepaper “Why a Religious Corporation?”
Reliance on Religious Guidance in Governance: Virginia law permits a director, in the fulfillment of the director’s fiduciary duties, to rely on the opinion of individuals who can reasonably be assumed to have expertise on a certain matter, but does not expressly allow a director to rely on guidance from religious figures within his or her faith tradition. Va. Code § 13.1-870
Understanding Religious Liberty in this State
*Important for all nonprofits doing business in Virginia, whether incorporated in Virginia or elsewhere
The religious education and formation of students is the very reason for the existence of most private religious schools, and therefore the selection and supervision of the teachers upon whom the schools rely to do this work lie at the core of their mission. Judicial review of the way in which religious schools discharge those responsibilities would undermine the independence of religious institutions in a way that the First Amendment does not tolerate.
- Our Lady of Guadalupe School v. Morrisey-Berru, 140 S. Ct. 2049 (2020).
Sometimes, the state or local government (like the city or county) makes laws that could conflict with your organization’s free exercise of religion or its sincerely-held religious beliefs.
For example, a law might require employers not to make faith-based distinctions between job candidates. If your organization’s mission is to pass on the teachings of your faith, you will need to make faith-based distinctions in evaluating candidates because their faith commitments will impact their abilities to partner in your mission and witness the faith to your program participants.
So what do you need to do? Be aware of the laws listed below. If any of the laws impact your organization—for example, if you are an employer or a facility open to the public—learn more about how you can protect yourself by reviewing Napa Legal’s religious liberty resources. Talk to an attorney if you have specific concerns.
Religious Liberty Protections
State Religious Freedom Restoration Act: Virginia has enacted a RFRA that protects the religious free exercise of all individuals and entities by requiring government burdens on religious exercise to satisfy strict scrutiny. These protections originate in a statute rather than the state constitution. Va. Code § 57–2.02(B); Not sure what a “religious freedom restoration act” is? Click here to learn the fundamentals.
State Constitutional Protection of Free Exercise: The Virginia Constitution follows in lockstep with the federal constitution’s protections, meeting but not exceeding the required minimum protections of the First Amendment. Va. Const., art. I, § 11, art. I, § 16
State Blaine Amendment: The Virginia Constitution contains a Blaine Amendment that broadly restricts faith-based organizations’ freedom to participate in public benefit programs on the same terms as similarly situated secular institutions. Current U.S. Supreme Court precedent has rendered this language ineffective, but it could become effective in the future if Court precedent changes. Va. Const., art. IV, § 16, art. VIII, § 11; Not sure what a Blaine Amendment is? Review the basics here.
Other Relevant State Laws and Regulations
Virginia currently has a very broad statewide public accommodation law. Be sure you understand this and any similar local regulations that apply to your organization.
Religious Freedom and Public Accommodation Laws: Virginia’s nondiscrimination laws generally restrict religious freedom for religious organizations that offer public programming and facilities and provide no meaningful religious accommodations or exemptions. Va. Code Ann. § 2.2-3904; Not sure what a public accommodation law is or what it means for your organization’s religious liberty? Learn the basics in this article which discusses the issue in the context of the case Fulton v. City of Philadelphia.
Protections for Religious Exercise in State of Emergency: Virginia law has no explicit constitutional or statutory protections for religious exercise during a time of emergency.
Key Employment Laws and Regulations
In addition to tracking with the protected classes in the federal anti-discrimination employment law (race, color, religion, sex, and national origin), Title VII of the Civil Rights Act of 1964, Virginia prohibits employers from discriminating on the basis of age. An employer is any person who has more than twenty employees for twenty or more weeks each year. No religious exemptions apply to this requirement. Local governments may also have employment-related regulations. An attorney can help you understand what requirements apply to your organization.
Religious Freedom for Faith-Based Employers: Va. Code Ann. § 2.2-3905(C) and (E) (exempting certain religious schools and organizations from nondiscrimination provisions); Need to review the basics on religious freedom and employment matters? Walk through a self-audit of best practices here.
Religious Freedom for Employees: Not Present
Conducting Activities or Programs in this State
Understanding the Business Registration Requirement
*Important primarily for nonprofits doing business in Virginia but incorporated elsewhere
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 and to file annual reports. These foreign business registration requirements are separate from the charitable organization registration.
Foreign businesses must register trade names with local circuit courts in which they transact business. Several Virginia counties, cities, and towns also require nonprofit and charitable organizations that do business within their borders to obtain a business license. Some Virginia counties, cities, and towns require charitable organizations that wish to solicit donations to provide the county, city, or town with evidence of registration with the Virginia Department of Agriculture and Consumer Services.
Not every out-of-state nonprofit organization needs to register or to obtain a license. An attorney can assist the organization in determining whether its connections with this state are significant enough to trigger the foreign business registration and licensing requirements. Examples of activities which might trigger these requirements include having employees physically located in the state, conducting programs in the state, and having an office in the state.
Fundraising and Charitable Registration in This State
How to Know (And What to D0) If You're Fundraising In This State
*Important for both Virginia and Foreign Nonprofits
Not sure what “charitable registration” is? Need to review the basics? Read this article for a refresher.
Charitable organizations generally must register with the Office of Charitable and Regulatory Programs within the Virginia Department of Agriculture and Consumer Services before soliciting any money. Virginia defines the terms “solicit” and “solicitation” very broadly. Charitable organizations also must resubmit a Registration Statement annually and are subject to recordkeeping requirements.
Virginia excludes churches, with specified caveats, and political parties from the definition of a “charitable organization.” Those entities are not required to seek an exemption from the registration requirement. Depending on their activities in the state, other religious organizations may need to complete a charitable registration, despite their religious identity or affiliation.
Virginia also exempts certain charitable organizations from the registration requirement, but eligible organizations must apply for the exemption. Exempt entities remain subject to other statutory duties, such as maintaining fiscal records.
If You're Fundraising In Multiple States, Make Sure You Understand the URS
In this state, organizations which are required to register have the option of registering through the Unified Registration Statement, which is a standardized charitable registration accepted in many states.
Evaluate Whether You'll Need a Registered Agent
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. However, foreign corporations and limited liability companies, including nonprofits, which transact business in the state are required to register with the Secretary of State and to maintain registered agents. Va. Code Ann. § 13.1-919; Va. Code Ann. § 13-1-925; Va. Code Ann. § 13.1-1015.
Follow the Rules About Communicating with the Public
This state requires non-exempt charitable organizations to include specific statements whenever the organizations are requesting donations (also called “charitable solicitation”). Below is sample language to use with charitable solicitations in this state:
You may obtain a copy of *ORG*’s financial statement by contacting the Virginia State Office of Consumer Affairs in the Department of Agriculture and Consumer Services.
Charitable Registration Statute
Charitable Registration Exemption Statute
Annual Report Requirement
Audit Requirements: As a condition of maintaining authorization to fundraise in the state, Virginia generally requires the submission of: (a) reviewed financials for organizations with revenue of $750,000 or more but less than $1,000,000, and (b) audited financials from organizations with annual contributions of $1,000,000 or more. See Va. Code § 58.1-609.11(D)(4)
Get Acquainted with State and Local Taxes and Exemptions
State and Local Taxes
In Virginia, organizations which have received federal income tax exemption under IRC Sec. 501(c)(3) are automatically exempt from state income tax, except on unrelated business income. 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 may be subject to state income tax and local business taxes (Va. Code Ann. § 58.1-401(5)). Consult with an accountant or attorney to confirm.
Nonprofit organizations are not automatically exempt from local real estate and property taxes and license fees. Although the Virginia Code exempts many organizations from local taxes (Va. Code Ann. § 58.1-3600 et seq.) and license fees (Va. Code Ann. § 58.1-3703(c)(18)), organizations must affirmatively seek an exemption from local tax authorities.
Certain nonprofit organizations are exempt from paying sales and use taxes if they meet specified criteria. Va. Code Ann. § 58.1-609.11. The exemption is not automatic; the organization must apply to the Virginia Department of Taxation for approval. An accountant or attorney can provide specific answers to your organization’s eligibility for the exemption.
Corporate Income Tax Statute
Virginia imposes a corporate income tax but automatically exempts organizations with federal 501(c)(3) exempt status. Va. Code § 58.1-401(5)
Corporate Franchise Tax Statute
What You Need to Know About Sales Tax
Sales and Use Tax: Virginia imposes a sales and use tax on religious organizations’ sales and only provides limited exemptions for certain items, such as occasional sales of food items. Virginia imposes a sales and use tax on religious organizations’ purchases and provides an automatic, comprehensive, narrow entity-based exemption, with supplementary entity-based exemptions generally available upon application. Va. Code § 58.1–609.11
Property Tax: Virginia imposes property tax but, upon application, generally provides an exemption to religious organizations for property used for religious and/or charitable purposes. Va. Code § 58.1-3617; Va. Const., art X, sec. 6
State-Specific Special Requirements
a Volunteer Attorney in Virginia
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.
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**Please note that the following state profiles are forthcoming and will be published soon:Hawaii and Washington