by Audrey M. Saxton, PLS
One of the most common and successful fundraising tools used by nonprofit groups is the raffle or prize drawing. However, most nonprofit groups are not even aware of the laws which govern gaming—or gambling, which, in essence, is what a raffle or prize drawing is. Local and state laws which determine whether gaming is permitted vary from state to state. While some states say a nonprofit can hold raffles, sometimes without a license, others just outright ban the practice of gaming in any form. So, before holding a fundraiser raffle or drawing, it would be advisable to check whether the activity is prohibited in your location. Just because “it has always been done” or “other groups do it all the time” does not necessarily mean that it is legal. The eventual cost to the nonprofit organization for doing something illegally might be too much in comparison to the time and effort invested to just check on the laws that govern the activity.
“Gaming” is defined by the Internal Revenue Service (“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 video games, and other games of chance.”1 So, by this definition, even a simple Chinese auction, as is seen so frequently at numerous NALS events, falls under the definition of gaming. But, not all raffles are defined the same. In some cases, your chapter will have to be careful to note whether its raffle is considered a lottery, a game of chance, or otherwise defined.
It must be noted that often when trying to determine if a charitable raffle can be held, an organization will first need to determine and be prepared to provide proof whether it is qualified as either a 501(c)(3) (nonprofit charitable) or a 501(c)(6) (nonprofit business league) organization or under one of the many other nonprofit categories defined by the IRS..2 NALS chapters fall under the category of
501(c)(6) business leagues unless they have met the criteria to register also as a 501(c)(3) for charitable purposes (such as the NALS Foundation).
To make things just a little more complicated, some jurisdictions require an organization to have been in operation for a minimum certain period of time, such as two (2) or five (5) years. For registration purposes, the organization will likely need to provide a copy of its nonprofit determination letter from the IRS as well, so it is advisable to be prepared to jump through some hoops. However, with all the requirements a nonprofit might face in order to get permission to run a fundraising raffle, in the end, it will likely be found that the time taken to research the laws and submit any necessary paperwork for registration or licensure will be well worth the effort.
Below is a table which should help you determine if raffles are legal in your area and provides a reference source for checking the laws in your state in further detail.
AUTHOR’S NOTE: The information and links provided are intended as an informational resource. The author is not responsible for content provided on web sites which are referenced in this table. No warranties or guarantees are implied or expressed. Information contained in the attached article and following table are not meant as a substitute for advice given from a licensed attorney. Consult with an attorney to ensure compliance with state and local regulations, or risk investigation and/or penalties if a complaint is filed or law enforcement agencies become aware of non-compliant activities.
|Location||Legal?||Registration or License Required?||Governing Laws||Internet Resource|
|Alabama||No||n/a||Ala. Code § 13A-12-20||Link|
|Alaska||Yes||Yes||Alaska Stat. 05.15.010||Link|
|Arizona||Yes||Yes, in some cases||Ariz. Rev. Stat § 13-331||Link|
§ 23-114-101, et seq.
|California||Yes||Yes||Cal. Penal Code § 320.5; Cal. Code Regs. tit 11, §§ 410-426||Link|
|Colorado||Yes||Yes||Colo. Rev. Stat. § 12-9-101, et seq.||Link|
|Connecticut||Yes||Yes||Conn. Gen. Stat. §§ 7-170 to 7-186||Link|
|Delaware||Yes||Yes||10-100-102 Del. Code Regs.||Link|
|Florida||Yes3||Yes||Fla. Stat. § 849.0935||Link|
|Georgia||Yes||Yes, see county sheriff||Ga. Code Ann. § 16-12-22||Link|
|Hawaii||No4||n/a||Haw. Rev. Stat. § 712-1220||Link|
|Idaho||Yes||Yes||Idaho Code Ann. § 67-77||Link|
|Illinois||Yes||Yes||230 Ill. Comp. Stat. 15/8.1||Link|
|Indiana||Yes||Yes||68 Ind. Admin. Code 21-1-01 through 21-7-14||Link|
|Iowa||Yes||Yes||Iowa Code § 99B.6||Link|
|Kansas||No||n/a||Kan. Stat. Ann. § 21-4302||Link|
|Kentucky||Yes||Yes||Ky. Rev. Stat. Ann. § 239.500-570,995||Link|
|Louisiana||Yes||Yes and No||La. Rev. Stat. Ann. §§ 4:701-740; § 27-402||Link|
|Maine||Yes||Yes||Me. Rev. Stat. Ann. tit. 17 § 331||Link|
|Maryland||Yes||Yes, Varies by county||Md. Code Title 13 Gaming||Link|
|Massachusetts||Yes||Yes||Mass. Gen. Laws ch. 271 § 7A||Link|
|Michigan||Yes||Yes||Mich. Comp. Laws § 432.101 et seq.||Link|
|Minnesota||Yes||No5||Minn. Stat. §§ 349.11 to 349.23||Link|
|Mississippi||Yes||No||Miss. Code Ann. § 97-33-50 et seq.||Link|
|Missouri||Yes6||Yes||Mo. Rev. Stat. §§ 313.005 to 313.080||Link 1|
|Montana||Yes||Yes||Mont. Code Ann. § 23-5-413; Mont. Admin. R. § 23-16-2602||Link|
|Nebraska||Yes||Yes||Neb. Rev. Stat.
§ 9-1,101 et seq.
|Nevada||Yes||Yes||Nev. Rev. Stat. §§ 462-064; 462-130 to 462-200||Link|
|New Hampshire||Yes||Yes||N.H. Rev. Stat. Ann. §§ 287-A:1 to 287-A:11||Link|
|New Jersey||Yes||Yes||N.J. Rev. Stat. Ann. §§ 5:8-50 to 5:8-||Link|
|New Mexico||Yes||Yes||N.M. Stat. Ann.
§§ 60-2F-1 to 60-2F-26
|New York||Yes||Yes||N.Y. Rac. Wag. Law §§ 185 to 195r||Link|
|North Carolina||Yes7||No||N.C. Gen. Stat.
§ 14-309.15; § 105‑130.11 et seq.
|North Dakota||Yes||Yes||N. D. Cent. Code
|Ohio||Yes8||No||Oh. Rev. Code. Ann. § 2915.092||Link|
|Oklahoma||Yes9||Yes||Okla. Stat. tit. 3A, §§ 401 to 427||Link|
|Oregon||Yes||Yes||Or. Rev. Stat. §§ 464-250 to -995 and Or. Admin. R. 137-025-0020 to -0310||Link 1|
|Pennsylvania||Yes||Yes||10 Pa. Code §§ 311 to 327||Link|
|Rhode Island||Yes||Yes||R.I. Gen. Laws §§ 11-19-1 et seq.; 41-3-1 et seq.||Link|
|South Carolina||No||n/a||S.C. Code Ann. §16-19-10 et seq.||Link|
|South Dakota||Yes||Yes||S.D. Const. § 25;
S.D. Codified Laws § 22-25-23 et seq.
|Tennessee||Yes10||Yes||Tenn. Code Ann.
§ 3-17-101 et seq.
|Texas||Yes||Yes||Tex. Occ. Code Ann. § 2002||Link|
|Utah||No||n/a||Utah Const. Art. 4, Sec. 27||Link|
|Vermont||Yes||No||Vt. Stat. Ann. tit. 13 § 2143||Link|
|Virginia||Yes||No11||Va. Code Ann. §§ 15.2-912.2; 18.2-334.2; 18.2-340-16 et seq.||Link|
|Washington||Yes||No||Wash. Rev. Code. Ann. § 9.46.0311||Link|
|Washington, D.C.||Yes||Yes||D.C. Mun. Regs. tit. 30, § 1500 et seq.||Link|
|West Virginia||Yes12||No13||W. Va. Code R. § 47-21-1 et seq.||Link|
|Wisconsin||Yes||Yes||Wis. Stat. Ann. § 563-90 et seq.||Link|
|Wyoming||Yes||No||Wyo. Code R. § 6-7-101||Link|
- See Gaming Activities, Notice 1335, Internal Revenue Service (October 2004), http://www.irs.gov/pub/irs-tege/notice_1335.pdf. For the purposes of this article, unrelated business income tax derived from gaming activities will not be addressed. However, it is recommended that your organization also investigate any tax liabilities or reporting requirements which might arise out of fundraising activities.
- There are a number of reasons why your 501(c)(6) nonprofit business league might wish to also create a 501(c)(3) nonprofit charity in addition to qualifying for fundraising activities. For more information on the difference between a 501(c)(3) and a 501(c)(6) and how to apply for a 501(c)(3) determination, visit http://www.irs.gov/charities/index.html or speak to an attorney or qualified tax professional.
- 501(c)(3) only.
- No raffles in exchange for money may be held, but door prizes given away at random for no money purchase are allowed.
- No registration or license is required unless the total value of prizes awarded in one calendar year exceeds $1,500; at which time, the organization must register and be licensed.
- Legal only for 501(c)(3), -(4), -(5), -(7), -(8), -(10) and -(19) organizations only. 501(c)(6) business leagues may not conduct raffles.
- Maximum of two per year.
- Only allowable for 501(c)(3), 501(c)(4), 501(c)(7), 501(c)(8), 501(c)(10), or 501(c)(19) organizations. However, any non-501(c)(3) must contribute no less than 50% of all proceeds from raffle to a qualified 501(c)(3) charitable organization.
- 501(c)(3) organizations only.
- 501(c)(3) only; only one event per year; no more than two events per year per host location.
- Unless projected proceeds in one year are projected to exceed $25,000.
- Only organizations falling under 501(c)(3), 501(c)(4), 501(c)(8), 501(c)(10), 501(c)(19) or 501(d) of the Internal Revenue Code of 1986, as amended; or those organizations exempt from income taxes under subsection 527(a) of said code.
- Provided proceeds do not exceed $4,000.