Colorado
Updates
What You’ll Learn
If you are a nonprofit in Colorado—or a nonprofit considering fundraising or other activities in Colorado—you must be familiar with Colorado’s basic nonprofit laws and regulations.
How can you become familiar with these laws? Where should you start?
Start here! This state profile lists and explains the basic requirements nonprofits must consider. When you are finished, you will be better equipped to set your organization up for success in Colorado.
Getting to Know the State Nonprofit Corporation Law
Background
*Important primarily for nonprofits incorporated in Colorado
There was once a little princess whose father was king over a great country full of mountains and valleys. His palace was built upon one of the mountains, and was very grand and beautiful. The princess, whose name was Irene, was born there, but she was sent soon after her birth, because her mother was not very strong, to be brought up by country people in a large house, half castle, half farm-house, on the side of another mountain, about halfway between its base and its peak. The princess was a sweet little creature, and at the time my story begins was about eight years old. I think, but she got older very fast. Her face was fair and pretty, with eyes like two bits of night-sky, each with a star dissolved in the blue. Those eyes you would have thought must have known they came from there, so often were they turned up in that direction.
- The Princess and the Goblin, George MacDonald
When reading a novel, we get to know a fictional character by the author’s description of him or her. The author tells us what the character will look like, what his or her purpose will be, how he or she will act, and how he or she will make decisions.
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 what the organization will be called, what its purpose will be, how the nonprofit will act, and how it will make decisions.
To get to know your own nonprofit, you must be familiar with the sections below.
State Nonprofit Corporation Law
Corporate Governance
Conflict Transactions: Colo. Rev. Stat. § 7-128-501; Need to review the basic best practices for conflicted transactions? See Bylaws Module 14: Conflicts of Interest.
Director Standards of Conduct: Colo. Rev. Stat. § 7-128-401; Need a refresher on the role of directors? See Bylaws Module 6: Directors.
Members: Eligibility and Statutory Powers: Colo. Rev. Stat. § 7-126-102; Colo. Rev. Stat. § 7-126-103; Colo. Rev. Stat. § 7-126-201; Not sure what a “member” is? Need to review the basics? See Bylaws Module 5: Members.
Indemnification: Colo. Rev. Stat. § 7-129-102; Colo. Rev. Stat. § 7-129-107; Not sure what “indemnification” is? Need to review the basics? See Bylaws Module 8: Indemnification.
For Religious Nonprofits
Nonprofit Religious Corporation Act: Colorado’s nonprofit corporation law mentions the option for nonprofit corporations to incorporate for religious purposes. However, the law lacks both: (a) specific provisions to protect the right of nonprofits incorporated for religious purposes to self-government in internal affairs and (b) an option to incorporate expressly as a nonprofit religious corporation. See Colo. Rev. Stat. § 7-50; Confused about what it means to be a religious nonprofit corporation? See our whitepaper “Why a Religious Corporation?”
Reliance on Religious Guidance in Governance: Colorado law permits a director to rely on guidance from religious figures within his or her faith tradition in the fulfillment of the director’s fiduciary duties. Colo. Rev. Stat. § 7-128-401
Understanding Religious Liberty in this State
Case Study
*Important for all nonprofits doing business in Colorado, whether incorporated in Colorado 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: Colorado has not enacted a RFRA and has enacted nondiscrimination laws that conflict with the beliefs of many religious organizations. Not sure what a “religious freedom restoration act” is? Click here to learn the fundamentals.
Constitutional Protections for Free Exercise: The Colorado Constitution follows in lockstep with the federal constitution’s protections, meeting but not exceeding the required minimum protections of the First Amendment. State Constitution, Art. II, § 4; Art. X, § 5
State Blaine Amendment: The Colorado 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 US Supreme Court precedent has rendered this language ineffective, but it could become effective in the future if Court precedent changes. State Constitution Article V, § 34; Not sure what a Blaine Amendment is? Review the basics here.
Other Relevant State Laws and Regulations
Protections for Religious Exercise in State of Emergency: Colorado law has no explicit constitutional or statutory protections for religious exercise during a time of emergency.
Key Employment Laws and Regulations
Religious Freedom for Faith-Based Employers: Colo. Rev. Stat. § 24-34-402. Need to review the basics on religious freedom and employment matters? Walk through a self-audit of best practices here.
Religious Freedom for Employees: No specific protections for employees’ free exercise in the workplace are present.
Conducting Activities or Programs in this State
Understanding the Business Registration Requirement
*Important primarily for nonprofits doing business in Colorado but incorporated elsewhere
If your organization is required to register as a charity, then you will also be subject to a related requirement—out-of-state business registration. Completing the business registration is a prerequisite to completing your charitable solicitation registration. Additionally, even if your organization is exempt from charitable registration requirements, you may need to register as a business if you open an office, conduct activities, or have remote employees in Colorado.
Business Registration Statute
Fundraising and Charitable Registration in This State
How to Know (And What to D0) If You're Fundraising In This State
*Important for both Colorado and Foreign Nonprofits
Not sure what “charitable registration” is? Need to review the basics? Read this article for a refresher.
The first question here is: “what does it mean to ‘fundraise’?” In this context, Colorado law uses the term “solicit,” rather than fundraise.
According to Colorado law, you are soliciting almost any time you ask for donations on behalf of a charity.
The law states that you are soliciting if you are “request[ing]…directly or indirectly, money…or any other thing of value on the plea or representation that such …value…will be used for a charitable purpose or will benefit a charitable organization.”
The second question to ask is: “might my organization be exempt from registration and reporting requirements?”
If you are a religious entity not required to file a Form 990 under 26 U.S.C. § 6033(a)(3)(A)(i) or (iii) (such as a church or a religious order), you might be eligible for a religious exemption from registration. See Colo. Rev. Stat. 6-16-104(6)(a). If you are a religious entity that does file a Form 990, you generally must register as a charity in Colorado.
Even if you are not eligible for a religious exemption, you still might have a chance to be exempt from the registration requirements.
Charities that do not satisfy one of the above exemptions may still be exempt if they do not raise or receive gross revenue in excess of $25,000.00 per year from sources other than governmental entities or organizations exempt under IRC Sec. 501(c)(3), or if they do not receive contributions from more than 10 individuals in a year. This exemption does not apply if the organization has contracted with a paid solicitor to solicit contributions in Colorado. See Colo. Rev. Stat. 6-16-104(c).
Out-of-state nonprofits that are not eligible for one of the above exemptions must register before soliciting in Colorado if one of the following apply: 1) you have interactive websites targeting persons in Colorado; or 2) if you receive “repeated and ongoing” contributions or “substantial contributions” from Colorado residents through your website.
Not sure if you receive contributions on a “repeated and ongoing” basis, or if the contributions you receive are “substantial”? Colorado law has answered these questions. An entity receives contributions on a “repeated and ongoing” basis if it receives at least 50 online contributions during a fiscal year. An entity receives “substantial” contributions if it receives the lesser of: (1) $25,000, or (2) 1% of its total contributions in online contributions during a fiscal year. 8 CCR 1505-9 addresses this -the 25k limit, as applicable to what constitutes “substantial contributions” refers to contributions from CO residents. See Rule 9.4.2 and 9.4.3. The 25k exemption from registration in IRS 16-16-104(6) does not specify CO residents, however.
If You're Fundraising In Multiple States, Make Sure You Understand the URS
You will not be able to use the Unified Registration Statement (a standardized charitable registration form) to complete your registration obligations in Colorado. If you are fundraising in other states, however, you still should consider using the URS.
Evaluate Whether You'll Need a Registered Agent
If you are required to register as a charity in Colorado, you will also need to complete a business registration. In the business registration, you will be required to name a registered agent who will receive important mail, including notice of lawsuits, on behalf of the organization.
Follow the Rules About Communicating with the Public
This state does not require organizations to post specific language when conducting charitable solicitations unless the organization is working with a paid solicitor. Required disclosures are summarized in a link provided in the “Helpful Links” section.
Optional (required if working with paid solicitor) - COLORADO RESIDENTS MAY OBTAIN COPIES OF REGISTRATION AND FINANCIAL DOCUMENTS FROM THE SECRETARY OF STATE’S OFFICE AT http://www.sos.state.co.us OR 303-894-2200. REGISTRATION BY THE SECRETARY OF STATE IS NOT AN ENDORSEMENT OF EITHER THE PAID SOLICITOR OR THE ORGANIZATION OR CAUSE THE SOLICITOR REPRESENTS.
Commercial co-venturers are subject to disclosure requirements if they reasonably believe that 50% or more of all proceeds from charitable sales will be derived from Colorado. Required disclosures are summarized in a link provided in the “Helpful Links” section.
Charitable Registration Statute
Charitable Registration Exemption Statute
Annual Report Requirement
Get Acquainted with State and Local Taxes and Exemptions
State and Local Taxes
*Important for all nonprofits doing business in Colorado, whether incorporated in Colorado or elsewhere
If your organization has received federal income tax exemption, including under IRC § 501(c)(3), you are automatically exempt from Colorado state income tax. You may choose to send a copy of your IRS determination letter to the state department of revenue to indicate the organization’s position that it qualifies for the exemption. Remember that, even if you are normally exempt from state income tax, if you have unrelated business taxable income (“UBTI”) that is subject to federal taxation, that UBTI will be subject to Colorado’s income tax.
If your organization is exempt from federal income tax under IRC § 501(c)(3), Colorado also generally exempts your organization from sales and use tax, as well as property taxes. You cannot receive these exemptions unless you apply, however. If you plan to own property or conduct sales in Colorado, you should talk to an accountant or attorney about exemptions in your specific circumstances.
Corporate Income Tax Statute
Colorado imposes a corporate income tax but automatically exempts organizations with federal 501(c)(3) exempt status. Colo. Rev. Stat. § 39-22-301(1)(d)
Corporate Franchise Tax Statute
This state does not have a corporate franchise tax.
What You Need to Know About Sales Tax
Sales and Use Tax: Colorado imposes a sales and use tax on religious organizations’ sales and only provides limited exemptions for certain items. Colorado imposes a sales and use tax but a broad and comprehensive, entity-based tax exemption for 501(c)(3) religious organizations’ purchases is generally available upon application. Sales Colo. Rev. Stat. §§ 39-26-101 — 39-26-129; Use Colo. Rev. Stat. §§ 39-26-201 — 39-26-212
State Tax Treatment of Unrelated Business Income: Colo. Rev. Stat. § 39-22-112
State-Specific Special Requirements
Miscellaneous
Useful Links
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Legal Disclaimer
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