Most states are active in policing the charities and organizations within their borders. For example; states generally determine which organizations can represent themselves as nonprofits, and they make sure that the nonprofits have valid purpose.
These states also police the solicitation and fundraising that takes place within their borders. State attorneys also play an important role in interpreting the laws for various states and bringing lawsuits against errant nonprofits in court.
During these lawsuits, state courts have the power and discretion to correct abuses in the nonprofit sector by rendering in decisions and handing down orders that deal with specific infractions.
There are no legal constraints on the sharing of information between the IRS and state revenue departments.
This means that they can both audit you or your organizatin more efficiently !
Fifty Laws for 50 States !
Where there's a state, there's a statute. In other words, most states have their own ideas and laws about what constitutes proper behavior by a nonprofit organization. These laws address issues like the following:
Registration
States need to keep tabs on who's operating nonprofit organizations within their borders. To get this information, states usually requiere nonprofits to fill out some type of current registration document.
State Taxation
States are responsible for deciding whether organizations within their borders are required to pay income, sales and use, and property taxes.
Regulation of Solicitation
States want to know who's knocking on doors, sending flyers, or telephoning people for money within their borders. Most states have a division of consumer affairs organization that monitors charitable solicitation activities. At a minimum, states usually require organizations that are soliciting funds to identify themselves and their purpose.
Immunity of directors and trustees
Because many nonprofits organizations depend on volunteers, it's important for states to have laws in place that address the issue of whether directors and trustees can be sued for the liabilities of the organization.
*** In most states, if registrations are kept current, the directors and trustees of the organization will be immune from civil suits unless they commit outright fraud.
Fraud Prevention
State attorneys general play an active role in making sure that sham organizations aren't used to dupe consumers into contributing to bogus causes,
Governance Issues
The federal government leaves day to day governance issues to states. These issues include things like how many board members need to be present before and organization can vote on an issue and the terms of the board members and how they are selected.