Raffles, bingo, and other games of chance can be great fundraising opportunities for charitable organizations, but they can also land you or your organization in hot water.
You may be surprised to learn that there are some exacting rules around commonplace charity fundraising activities. For example, certain charitable organizations cannot legally hold a fundraising raffle until its nonprofit status has been officially approved by the IRS. According to the Charitable Law Section of the Ohio Attorney General’s Office, Ohio Revised Code Section 2915.092 requires various 501(c) organizations to have had their tax-exempt status from the IRS for over two years before it can conduct a raffle. In other words, simply applying for nonprofit status isn’t enough; you must have your determination letter in hand.
Under O.R.C. Section 2915.092(C), failure to comply with this requirement is considered illegal conduct of a raffle – a misdemeanor punishable by a fine up to $1,000 or even imprisonment of up to 180 days in the most extreme cases.
Thankfully, there are a number of mitigating factors making it unlikely that a court would impose jail time for illegally holding a small charity raffle that does not comply with the technical requirements of the statute. Nevertheless, even minor violations can badly damage an organization’s reputation and put a dent in fundraising efforts in the critical early stages of its existence. It is always best to seek legal counsel before penalties even become a consideration. Contact one of WHP’s Business Organizations & Tax attorneys for assistance.