OCTOBER 1ST DEADLINE FAST APPROACHING IF YOUR CHARITY CONDUCTS RAFFLES

The California Attorney General’s Office is reaching out, trying to educate consumers and tax-exempt organizations on some of the new, and not-so-new, rules related to raffles.  Most readers are aware that California charities and other private nonprofit organizations may conduct raffles to raise money for beneficial or charitable purposes.  This is a special exemption to the general California constitutional prohibition against lotteries.  This special exemption, however, requires, among other things, that at least 90 percent of the gross receipts from the raffle go directly to the beneficial or charitable purposes of the organization.

The question I am asked most often is:  “How can this be?  We do 50/50 raffles all the time!”  In a 50/50 raffle, charities typically pay out half of the proceeds collected as the prize, and then keep half of the proceeds for their beneficial or charitable purpose.  Therefore the answer to the question is:  50/50 raffles are illegal, because they violate the 90% rule.  (See Penal Code § 320.5(a)(4)(A).)  In other words, 90% of the funds collected are not retained for the beneficial or charitable purposes of the organization.

The first step before any charity may conduct a raffle, however, is to register with the Attorney General's Registry of Charitable Trusts prior to conducting the raffle.  The form to register can be found on the Attorney General’s website, form CT-NRP-1.  The charity is also required to file an aggregate financial disclosure report for all raffles held during the reporting year, form CT-NRP-2.  This form must be used by all charitable organizations, regardless of the number of raffles held during the reporting period, and there is no fee for filing the report. 

Importantly, the charitable organization must keep precise records; reports containing estimates of proceeds or expenses will be rejected. Organizations that conduct raffles as part of a larger fundraising event must maintain a record of the raffle proceeds and expenses separate and apart from all other monies raised at the event, and report only raffle proceeds and expenses on their annual Form CT-NRP-2.

This single aggregate report for all raffles (Form CT-NRP-2) is due on or before October 1st.

Questions?  Comment, or send me an email, and let’s discuss. 

 

Nothing in this blog is intended to create an attorney-client relationship.  This article is intended to provide a general overview of the current status of the law for informational purposes only, and is not intended to constitute, or serve as a substitute for, a professional legal consultation.  Laws change every day; please consult an attorney regarding the current status of the law, and how the law affects your specific circumstances. Thank you.