TLDR
California is the most heavily regulated state for charitable organizations. Any charity soliciting California donors registers with the Attorney General within 30 days of first receiving charitable assets, files Form RRF-1 annually with the Registry of Charities and Fundraisers, and crosses a hard $2,000,000 audit threshold under the Nonprofit Integrity Act. The Franchise Tax Board adds a parallel state exempt return (Form 199), and federal pass-throughs still trigger the $1,000,000 Single Audit. Plan for two-track compliance from day one.
California is the most heavily regulated state for nonprofit organizations in the country. The combination of the Attorney General’s Registry of Charities and Fundraisers, the Franchise Tax Board’s separate exempt-organization regime, the county-by-county Welfare Exemption for property tax, and the Nonprofit Integrity Act’s audit committee and CPA audit requirements creates a compliance footprint that out-of-state founders consistently underestimate.
This FAQ collects the questions California executive directors and finance staff actually ask in the first year. Every answer is grounded in the underlying California statute, IRS guidance, or California state agency publication, and the source is cited so you can verify the current rule. The intent is to map the terrain — when you need formal advice, your California nonprofit attorney or audit firm is the right call.
Where to go next
- The California state hub: GrantPipe for California nonprofits
- Step-by-step setup: California nonprofit startup guide
- Audit thresholds across states: Nonprofit audit requirements by state
- Free download: California compliance checklist
Implementation realities and migration notes
Mid-sized nonprofits in this category typically inherit a tangle of restricted-fund histories: federal pass-throughs, state agency contracts, family-foundation grants, and partner funding stretching back many years. Migrating that history cleanly is not optional — auditors and program officers will ask questions that require a year-by-year reconstruction. Implementation timelines run six to ten weeks for organizations that scope the data inventory before signing. Cutting corners on migration to chase a fast launch usually surfaces gaps during the next single-audit cycle, and the cost of fixing those gaps after the fact is meaningfully higher than doing migration right at the start.
Plan accordingly, and require any vendor on the shortlist to demonstrate restricted-fund handling, grant tracking, and donor record migration on a representative sample of your actual historical data before you sign. Vendors that decline to demo on real data are filtering you out for a reason. The demo on your data is where the gaps surface — both the gaps in the vendor’s product and the gaps in your existing records that you will need to clean up regardless of which system you choose. Use that demo to set realistic expectations with the board and the audit committee about timeline and scope before contracts get signed.
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Frequently asked
Frequently Asked Questions
Do I have to register with California to solicit donations?
Yes, if you solicit from California residents. California Government Code Section 12585 requires every charitable corporation, unincorporated association, or trustee holding charitable assets to register with the California Attorney General's Registry of Charities and Fundraisers within 30 days of first receiving charitable property. Registration is required regardless of where the charity is incorporated. An out-of-state nonprofit that posts a donate page accessible to California residents and accepts even one California gift is generally required to register.
Which form do I file to register initially?
Form CT-1 (Initial Registration Form) filed with the Registry of Charities and Fundraisers, $50 fee. Submit with a copy of your Articles of Incorporation, Bylaws, IRS determination letter (if available), and any required schedules. File online via the Registry portal at oag.ca.gov/charities. The Attorney General assigns a Charity Registration (CT) number, which becomes your reference for every subsequent filing. Continue any solicitation activity already underway, but do not start new campaigns until registration is submitted.
What is Form RRF-1 and when is it due?
Form RRF-1 (Annual Registration Renewal Fee Report) is the annual report every registered charity files with the California Attorney General. It is due four months and 15 days after fiscal year end — May 15 for calendar-year filers. The form requires a copy of Form 990 (or 990-EZ or 990-PF) and a registration renewal fee that scales with gross revenue: $0 under $25,000, up to $1,200 at $50 million or more. Late filing triggers a $25 fee and continued non-filing leads to suspension.
What is California's audit threshold for nonprofits?
Under the Nonprofit Integrity Act of 2004 (Government Code Section 12586(e)), a charitable corporation with gross revenue of $2,000,000 or more in any fiscal year must prepare audited financial statements by an independent CPA. Gross revenue excludes government grants for which the agency requires an accounting. The audit must follow generally accepted auditing standards, must be made available to the public on request, and is submitted with the RRF-1. The threshold is hard — there is no phase-in or grace period for the year you cross it.
Does California require an audit committee?
Yes, for charitable corporations with $2,000,000 or more in gross revenue. The Nonprofit Integrity Act requires an audit committee separate from the finance committee. Members of the audit committee may not include the staff president/CEO or treasurer. The audit committee oversees engagement of the auditor, reviews the audit, and reports findings to the full board. Public benefit corporations subject to the Act also have a board duty to review and approve the compensation of the CEO and CFO.
What is California Form 199 and who files it?
Form 199 (California Exempt Organization Annual Information Return) is the Franchise Tax Board annual return. Most nonprofits exempt under Revenue and Taxation Code Section 23701 file Form 199 by the 15th day of the 5th month after fiscal year end (May 15 for calendar-year filers). Organizations with gross receipts normally $50,000 or less may file Form 199N (the e-Postcard) instead. Form 199 has a $10 minimum filing fee; 199N is free. Filing Form 990 with the IRS does not satisfy the FTB requirement.
How does California sales-tax exemption work for nonprofits?
California does not grant nonprofits a blanket exemption from sales and use tax. Most sales by a nonprofit are taxable, and most purchases are taxable. Specific narrow exemptions exist: occasional sales by nonprofits, sales of food at fundraisers, sales by qualifying youth groups, and certain sales by museums and zoos. The California Department of Tax and Fee Administration (CDTFA) administers sales tax. Any nonprofit selling tangible personal property regularly must obtain a seller's permit and collect tax.
Are California nonprofits exempt from property tax?
Not automatically. Under Revenue and Taxation Code Section 214 (the Welfare Exemption), a nonprofit must file Form BOE-267 with the county assessor and obtain an Organizational Clearance Certificate from the State Board of Equalization. The property must be used exclusively for religious, hospital, scientific, or charitable purposes by the qualifying organization. Annual filings with the county assessor are required to maintain the exemption. The county assessor may inspect the property to verify exempt use.
How does payroll registration work in California?
Federal: obtain an EIN and register with EFTPS for federal deposits. State: register with the California Employment Development Department (EDD) using Form DE 1 for state withholding (PIT), state disability insurance (SDI), and unemployment insurance (UI). 501(c)(3) organizations may elect the reimbursing-employer method for UI under Unemployment Insurance Code Section 803(b), which can be cheaper for organizations with low turnover but is irrevocable for at least two years. Workers' compensation insurance is mandatory in California for all employers.
How do I incorporate a nonprofit in California?
File Articles of Incorporation with the California Secretary of State. Public benefit corporations (most 501(c)(3) charities) file Form ARTS-PB-501(c)(3); religious corporations file ARTS-RE; mutual benefit corporations file ARTS-MU. The filing fee is $30. The articles must include specific IRS-approved language regarding the corporation's purpose, prohibited activities, and dissolution. After incorporation, draft bylaws, hold an organizational meeting, file IRS Form 1023 or 1023-EZ for federal exemption, and file Form 3500 or 3500A with the FTB for state exemption.
What is the minimum board size for California nonprofits?
The California Corporations Code allows a nonprofit corporation to operate with a single director, but most 501(c)(3) public benefit corporations are advised to maintain at least three directors to satisfy IRS expectations and California governance norms. Under Corporations Code Section 5227, no more than 49% of directors of a public benefit corporation may be 'interested persons' (compensated employees, family members, or business partners). Directors do not need to be California residents.
Are there fiscal-year quirks for California nonprofits?
Most California filings synchronize on the 15th day of the 5th month after fiscal year end. RRF-1 (Attorney General), Form 199 (FTB), and Form 990 (IRS) all share the May 15 calendar-year deadline. The biennial Statement of Information (Form SI-100) filed with the Secretary of State is on a different cycle, due every other year by the end of the calendar month in which the corporation was originally registered. Missing the SI-100 leads to suspension by the SOS, separate from any FTB or AG actions.
How do federal grants flow through California state agencies?
California is a major federal pass-through state. Department of Health Care Services (DHCS) administers Medicaid; California Department of Social Services (CDSS) handles SNAP, TANF, and child welfare; California Department of Education (CDE) administers federal education grants; California Department of Housing and Community Development (HCD) handles HUD pass-throughs. The state agency is the pass-through entity under 2 CFR 200.332 and is responsible for subrecipient monitoring. Uniform Guidance procurement, allowable cost, and audit rules apply at the subrecipient level.
What are the top state-funded grant programs California nonprofits should know?
California Arts Council general operating support and project grants; California Department of Aging and Independent Living grants; California Volunteers AmeriCorps and Climate Action Corps programs; the California Office of Emergency Services (Cal OES) Victim Services and homeland security grants; the California Strategic Growth Council Transformative Climate Communities; and California Department of Public Health prevention and equity grants. Most are administered through the state agency's grant portal; some flow through Cal eGrants.
Where do California nonprofits file annual reports?
Five places. (1) IRS — Form 990, 990-EZ, or 990-N. (2) California Attorney General — RRF-1 plus 990 attachment. (3) Franchise Tax Board — Form 199 or 199N. (4) Secretary of State — Statement of Information (Form SI-100) every two years. (5) Local — county assessor for the Welfare Exemption (Form BOE-267-A) annually if you own real property. Missing any one of these can trigger suspension by the relevant agency. They do not communicate with each other; reinstatement is agency-by-agency.
What is the most common California nonprofit compliance mistake?
Operating without state-level registration while waiting for federal 501(c)(3) determination. California requires registration within 30 days of first receiving charitable property, well before most organizations receive an IRS determination letter. Founders assume they should wait for the IRS letter; meanwhile, the 30-day window has closed and the AG can later cite late registration. File Form CT-1 with whatever federal status you have at that time — typically a pending Form 1023 — and update with the determination letter when it arrives.
Do California professional fundraisers register separately?
Yes. Commercial fundraisers, fundraising counsel, and commercial coventurers must register separately with the Attorney General before soliciting in California. Charities that hire a commercial fundraiser file Form CT-694 (Notice of Intent to Solicit) at least 10 working days before the campaign begins, attach the contract, and require the fundraiser to post a $25,000 surety bond. Verify your fundraiser's registration status at the Registry's public search before signing. Failure to verify is a separate violation by the charity.
What are California's rules on raffles?
Penal Code Section 320.5 governs charitable raffles. Eligible 501(c) nonprofits register annually with the Attorney General using Form CT-NRP-1 by September 1 for the registration year (October 1 through September 30). At least 90% of gross raffle proceeds must be used for beneficial or charitable purposes. Raffles cannot be conducted over the internet, with limited exceptions for major league sports raffles. An aggregate report (Form CT-NRP-2) is filed annually.
What records must California nonprofits keep?
California Government Code Section 12586 and Corporations Code Section 6320 require charities to keep adequate and correct books and records of accounts, minutes of board and committee meetings, and a record of names and addresses of members (if a membership corporation). Standard practice: financial records for at least seven years, board minutes permanently, donor restriction documentation for the life of the restriction plus seven years after release. The Attorney General can request supporting documentation for any line item on RRF-1 or Form 990 at any time.
Is California subject to Brown Act / Public Records Act for nonprofits?
Generally no. The Ralph M. Brown Act (Government Code Section 54950) and the California Public Records Act apply to local government bodies. They apply to a nonprofit only if it is a 'legislative body' of a local agency — for example, when a city creates a nonprofit corporation to perform city functions and appoints a majority of its board. Most operating 501(c)(3) public benefit corporations are not subject to either Act. Get a fact-specific legal review if your charity has government-appointed board seats.
How does GrantPipe help California nonprofits stay compliant?
GrantPipe tracks every grant award alongside the program funds it supports, surfaces deadlines for federal pass-throughs from DHCS, CDSS, CDE, and HCD, and produces audit-ready schedules for both the Nonprofit Integrity Act audit at $2 million in revenue and the federal Single Audit at $1 million in federal awards. It is one system for donors, grants, restricted funds, and compliance documentation — built for the mid-sized California nonprofits that have outgrown spreadsheets but cannot afford a full-time grants accountant.
Where can I read the underlying California statutes and forms?
California Government Code Sections 12580–12599.10 (Supervision of Trustees and Fundraisers for Charitable Purposes) and California Corporations Code Sections 5110–6910 (Nonprofit Public Benefit Corporations) on leginfo.legislature.ca.gov. Attorney General Registry forms at oag.ca.gov/charities/forms. Franchise Tax Board exempt organization forms at ftb.ca.gov/forms/business. Secretary of State nonprofit filings at sos.ca.gov/business-programs. EDD employer registration at edd.ca.gov.