The Legal Considerations of a Raffle
One of the most common and effective fundraiser tools utilized by nonprofit groups may be the raffle or prize drawing. However, most nonprofit groups aren’t even conscious of the laws and regulations which govern gaming-or gambling, which, essentially, is exactly what a raffle or prize drawing is. Local and condition laws and regulations which see whether gaming is allowed change from condition to condition. Although some states say a nonprofit holds raffles, sometimes with no license, others just outright prohibit the concept of gaming in all forms. So, before holding a fundraising event raffle or drawing, it might be better to check if the activity is legitimate inside your location. Simply because “it happens to be done” or “other groups do all of it the time” doesn’t always mean that it’s legal. The eventual cost towards the nonprofit organization for doing something unlawfully may be an excessive amount of as compared to the effort and time invested to simply check up on the laws and regulations that govern the game.
“Gaming” is determined through the Irs (“IRS”) as “includ[ing] bingo, beano, raffles, lotteries, pull-tabs, scratch-offs, pari-mutuel betting, Calcutta wagering, pickle jars, punchboards, tip boards, tip jars, certain game titles, along with other games of risk.”1 So, with this definition, a simple Chinese auction, out of the box seen frequently at numerous NALS occasions, falls under the phrase gaming. But, not every raffles are defined exactly the same. In some instances, your chapter must be careful to notice be it raffle is recognized as a lottery, a game title of risk, or else defined.
It should be noted that frequently when attempting to find out if your charitable raffle could be held, a business will first have to determine and be ready to provide proof whether it’s qualified as whether 501(c)(3) (nonprofit charitable) or perhaps a 501(c)(6) (nonprofit business league) organization or under one of the numerous other nonprofit groups based on the government..2 NALS sections come under the course of
501(c)(6) business leagues unless of course they’ve met the factors to join up also like a 501(c)(3) for charitable reasons (like the NALS Foundation).
To create things somewhat more difficult, some areas require a business to will be in operation for any minimum certain time period, for example two (2) or five (5) years. For registration reasons, the business will probably need use a copy of their nonprofit determination letter in the IRS too, so you should be ready to jump through some hoops. However, with the needs a nonprofit might face to be able to get permission to operate a fundraiser raffle, ultimately, it’ll be discovered that time taken to check out the laws and regulations and submit any necessary documents for registration or licensure is going to be worth the effort.