Colorado Secretary of State (Revised July 8, 2010)
Whenever the question arises as to whether an auctioneer needs to register, the Secretary of State’s staff will request a copy of a contract or written agreement between the auctioneer and the charity to see if the specific arrangements require registration as a paid solicitor or professional fundraising consultant under the Charitable Solicitations Act. Each auctioneer registration question will be very fact-specific. In each case the following questions should be considered:
1. Is the auctioneer a paid solicitor or a professional fundraising consultant?
A paid solicitor means a person who, for monetary compensation, performs any service in which contributions will be solicited in Colorado.
A professional fundraising consultant is a person retained by a charity who plans, manages, advises, consults, or prepares material for the solicitation of contributions, but who does not solicit contributions.
A professional fundraising consultant must be retained by a charity for a fixed fee or rate. If the auctioneer’s compensation is contingent upon the amount of contributions, then the auctioneer is not a professional fundraising consultant.
2. Is the auctioneer compensated for soliciting contributions?
Solicit means to ask for money on the plea or representation that such money, or any portion thereof, will be used for a charitable purpose or will benefit a charitable organization. The term “solicit” includes, but need not be limited to, the following methods of requesting such money:
- any oral or written request;
- a plea or representation that the sale of an item, or any portion thereof, will be used for a charitable purpose or will benefit a charitable organization. It includes the use of the name of any charitable organization in an appeal as an inducement or reason for making the sale.
3. If the auctioneer is compensated for soliciting contributions, then s/he meets the definition of a paid solicitor.
The only statutory exceptions to the definition of paid solicitor are:
- A person whose sole responsibility is to print or mail fund-raising literature;
- A lawyer, investment counselor, or banker who renders professional services to a charitable organization or advises a person to make a charitable contribution during the course of rendering such professional services or advice to the charitable organization or person;
- A bona fide volunteer;
- A director, officer, or compensated employee who is directly employed by a charitable organization which, at the time of the solicitation, had received a determination letter from the internal revenue service granting the organization tax-exempt status pursuant to 26 U.S.C. sec. 501 (c) (3), (c) (4), (c) (8), (c) (10), or (c) (19). For purposes of this paragraph (d), such a determination letter shall not have retroactive effect.
- Any employee of the department of revenue collecting voluntary contributions for organ and tissue donations under the provisions of sections 42-2-107 (4) (b) (V) and 42-2-118 (1) (a) (II), C.R.S.; or
- A person whose only responsibility in connection with a charitable contribution is to provide a merchant account to process credit card payments using the internet.
Examples of Charity Auctions
Decedent’s estate plan requires the sale of all estate assets and the distribution of all sale proceeds to decedent’s heirs with no gifts or distribution to charity. In this instance, no registration is required – no charitable contributions are solicited and no charitable donation is going to charity.
Decedent’s estate plan requires the sale of all estate assets and the distribution of all sale proceeds to charitable organization(s) specified by the decedent; no mention of the charitable interest by the auctioneer before or during the auction. In this instance, no registration is required – no contributions are solicited and all charitable donations are made by the decedent.
Decedent’s estate plan requires the sale of all estate assets and the distribution of all sale proceeds to a charitable organization(s) specified by the decedent; auctioneer advertises the charitable interest to promote the estate auction in advance and during the auction encourages bidding on the basis that bidders are benefitting a charitable cause. In this instance registration is required – a charitable appeal is used to advertise the estate auction and bidders are encouraged throughout the auction, e.g., “to bid as much as they can afford since all proceeds benefit a good cause.” Given the principal/agent relationship (The auctioneer in this case is more than just a vendor providing a service for the estate.) between the estate’s fiduciary and the auctioneer, the estate should be registered as a charitable organization and the auctioneer as its professional solicitor. Registration is easily avoided by not utilizing any charitable appeals to promote the auction or encourage bidders, but if a charitable appeal is used, then compliance with registration and reporting is required.
Charitable organization conducts auction of sports memorabilia to support its programs and services. In this instance, registration is required by both the charity as a charitable organization and by the auctioneer (fundraiser) as a professional solicitor.