When hosting an event/ fundraiser or selling a product and using the phrase: "a portion of the proceeds to benefit..."

Nonprofit and Church Legal Trends - Free Edition - November December 2007 (free edition)

When hosting an event/fundraiser or selling a product and using the phrase: "a portion of the proceeds to benefit..." is a nonprofit legally obligated to state what portion is directed to the non-profit?

There is no explicit requirement to state exactly what portion of the proceeds are to benefit charity, but the nonprofit should be aware that you may be required to register for charitable solicitation in the state(s) in which you are soliciting and that the charitable beneficiaries may also have to be registered. Most states have anti-fraud laws (either included in the charitable solicitation registration act or passed separately) that could be violated if your advertising is false or misleading or if you give false or misleading statements in answer to specific questions. One of the more common problems is for a commercial vendor to advertise that 10% or an undisclosed portion goes to a certain charity and the charity never checks up when it allows its reputation and name to be used to determine if the for profit is giving it to the nonprofit as advertised. Failure to make reasonable efforts could be misinterpreted in a later lawsuit as assisting in the fraud by its omissions if little or none of the profits actually go to the nonprofit as advertised.