When deciding who needs to register in order to conduct a charity auction, the following questions should be considered:

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 by that person or any person he or she employs. If the auctioneer avoids making any plea or representation that a charity or charitable purpose will benefit from the auction, no registration is required. [1] If, on the other hand, the auctioneer implores higher bids because a charity or charitable purpose will benefit, then that person needs to be registered as paid solicitor.

A professional fundraising consultant means any person, other than a bona fide officer or regular employee of a charitable organization, who is retained by a charitable organization for a fixed fee or rate under a written agreement to plan, manage, advise, consult, or prepare material for the solicitation in Colorado of charitable contributions, but who does not solicit contributions or employ, procure, or engage any compensated person to solicit contributions. [2]

Is the auctioneer soliciting contributions?

To solicit means to ask for money, credit, property, financial assistance, or any other thing of value on the plea or representation that such money, credit, property, financial assistance, or other thing of value, or any portion thereof, will be used for a charitable purpose or will benefit a charitable organization. [3] The term "solicit" includes, but need not be limited to, the following methods of requesting such money, credit, property, financial assistance, or other thing of value: (a) any oral or written request; or (b) 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. [3] It includes the use of the name of any charitable organization or purpose as an inducement or reason for making a higher bid.

If the auctioneer is paid to solicit contributions, then he or she meets the definition of a paid solicitor. The statutory exceptions to the definition of a paid solicitor [3] 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 [4] 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.
• A person who prepares a grant application for a charitable organization or purpose, unless the person's compensation is computed on the basis of funds to be raised or actually raised as a result of the grant application.
• A person who provides any service or product to a charitable organization who does not directly solicit for a charitable contribution.

Examples of charity auctions

Example 1 - 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.

Example 2 - 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.

Example 3 - 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 representative 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.

Example 4 - 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.

Charity auctions and charitable contributions

The IRS has indicated that whether a payment made at a charity fundraising auction is a deductible charitable contribution depends on various factors, including the amount paid and the fair market value of the item purchased. Please see the IRS webpage on charity auctions for more guidance on the deductibility of items purchased at a charity auction.

[1] Section 6-16-103(7), C.R.S.
[2] Section 6-16-103(9.3), C.R.S.
[3] Section 6-16-103(10), C.R.S.
[4] Rule 1.6 of the Rules for the Administration of the Colorado Charitable Solicitations Act (8 CCR 1505-9) provides:
“Directly employed,” as used in section 6-16-103(7)(d), C.R.S., means the charitable organization controls or directs the means and methods of accomplishing the result of the individual’s work, regardless of whether the individual is employed full-time or part-time, is paid a salary or on commission, or is called an employee or an agent or independent contractor.