Rules around Charity Raffles
Q: Are there any restrictions on the number of draws allowed under a permit? You may offer the public two unlicensed sweepstakes each year if the combined gross revenue from the two sweepstakes does not exceed $5,000 in a calendar year. To exceed these limits, you must purchase a raffle license. In this guide, you`ll find information about the rules and guidelines you should follow if your organization is considering a Massachusetts sweepstakes. If you have any questions about the content of this guide, please contact the Non-Profit and Public Charities Division of the Office of the Attorney General. A: Currently, there is no law in Massachusetts that allows raffle tickets to be sold over the Internet. The seller and the buyer of the contest must sign the lot. In addition, online sweepstakes can affect federal and state laws, and some states specifically prohibit it. Organizations wishing to hold online sweepstakes should consult a lawyer who can advise you on the legal requirements before proceeding with an online sweepstakes. Depending on your state`s laws, you may need to register your raffle in advance.
You may be limited by the type of business or organization. You may even be allowed to hold only a certain number of raffles per year. Raffles are a great way to raise money, but there are many rules and regulations you need to follow if you want your raffle to be successful. These fundraising tips will help you raise the funds you need while avoiding serious pitfalls. Raffles have all three elements, which would make them technically prohibited. However, many jurisdictions make exceptions for fundraising raffles. Exceptions apply to certain types of organizations, raffle prizes below a certain amount, and for other reasons. As you can see, there are many raffle rules that nonprofits must follow. You should consult a CPA familiar with charitable gaming tax laws before holding a fundraising draw to avoid tax obligations. When it comes to the IRS, ignorance of the law is no excuse and you might find that your group is responsible for uncollected taxes.
A: No, there is no limit to the number of raffles that can be held. In the United States, raffles (as well as lotteries and other forms of gambling) are controlled by a combination of state and federal laws. That said, whether you can run a sweepstakes and what you need to do to make sure the sweepstakes meets all the legal requirements depends on where you are. Canada allows not-for-profit organizations and only not-for-profit organizations to hold raffles as fundraisers As in the United States, details vary from province to province. Your state may allow nonprofits to hold raffles, bingo, auctions, and other games of chance. If so, it`s likely that your nonprofit will need to apply to the state for a license first. The IRS also regulates gambling, as well as taxable income earned by winning players. Here are some of the problems gambling poses for nonprofits: Some nonprofits are allowed to conduct certain gaming activities to raise funds. They are allowed to hold raffles, defined as «an agreement to raise funds through the sale of tickets, some of which, determined at random after the sale, are eligible for prizes.» Raffle ticket sweepstakes are considered games of chance, similar to lottery tickets and bingo games, and as such, the laws governing raffles are administered by state and county governments in the United States. Raffle laws also vary widely from state to state (and county to county in some states), making it difficult to specify exact regulations for your area.
Many nonprofits use gambling and auctions as fundraising vehicles – unaware that «legalized gambling» is a regulated activity and is even illegal in many states. So, that silent poker night or auction that caused so much attention. Make sure the buzzing isn`t the vibration of your cell phone letting you know that your nonprofit is being sued. Even an auction that raises money for charity can have unintended consequences for donors and nonprofits, unless you know and follow the rules. From fantasy leagues to casino nights, non-profit organizations and gambling are a misunderstood minefield. Currently, raffles with various restrictions are legal in 47 of the 50 states. The states that completely ban raffles are Alabama, Hawaii and Utah. Most people participated in raffles for a good cause and supported a local church, school or sports team. Raffles are great fundraisers, but they also have legal restrictions.
That said, if you want to run one yourself, you need to know how to do it properly. Credit unions can offer raffles if all revenues, minus prizes and expenses, are donated to charity. If you use a draw as a fundraiser, you are holding a personal draw – a draw offered by an organization, not the government. This is important because raffles are similar to lotteries. In addition to two unlicensed public sweepstakes per year, you may offer an unlimited number of member-only sweepstakes, provided that the combined gross revenue from members-only sweepstakes does not exceed $5,000 in a calendar year.