Do You Need a Small Games of Chance License for your Fundraiser?
By Christine Kuntz | | Nonprofit Organizations
At your last fundraiser brainstorming session, that purse bingo idea was stellar. You advertised and generated a lot of interest — including government interest. Now the county treasurer is requesting to see your small games of chance license. Oops.
Pennsylvania considers raffles, bingo, 50/50 tickets, auctions, and other common fundraisers to be gambling.
That is because the purchase of the ticket involves the chance, but not the guarantee, that you will win the prize.
So, Pennsylvania nonprofits, religious groups, veteran’s clubs, and fraternal organizations need to be aware of, and comply with, the state’s Small Games of Chance Act.
How do we obtain a Pennsylvania Small Games of Chance License?
License applications are available from your county treasurer (or equivalent for those located in home-rule counties and first-class cities).
There are three types of licenses. Which one do we choose?
It depends. The Regular License is valid for one year and costs $125. The Monthly License is valid for 30 consecutive days and costs $25. The third option is the Special Raffle Permit which, when combined with a regular or monthly license, permits the group to host a raffle in excess of normal games of chance prize limits.
Are there limits on games and prizes?
Yes. Read section 302 of the law carefully. It tells you which games you may offer and what prize limits apply. Prize limits vary by game, week, and month.
And no, you can’t award animals as prizes (except goldfish).
How can we spend the money?
Generally, you must use the proceeds to carry out your organization’s “public purpose”. In other words, use the funds to further your mission.
But, see the next question: certain organizations are limited in their use of funds by the 60/40 rule.
What is Pennsylvania’s 60/40 Rule?
Clubs, such as fraternal organizations and veterans’ clubs, must be aware of the 60/40 rule. This rule allows clubs to use a certain percentage of the gaming proceeds toward club expenses, except that if gaming proceeds are less than $40,000, then at least $20,000 must be used toward the public purpose. Compliance can be difficult for smaller clubs that have high expenses (own buildings, run restaurants, etc.) and rely on gaming revenue to support the club.
Are prizes taxable?
Yes. The winner pays tax on gambling earnings.
Federal law requires you to issue a W2-G to people who win $600 or more in a raffle if the prize is worth more than 300 times the wager.
For example, if the 50/50 ticket costs $2 and the winner takes home $600 or more, you must file a Form W2-G.
However, if the raffle ticket cost $10 and the winner receives $600, the wager is no longer 300X the cost of the ticket. So, no W2-G required.
The W2-G prize limits are different for bingo, poker, keno, and other types of games.
Bingo. Issue the W2-G if the prize is $1,200 or more
Keno. Issue the W2-G if the prize is $1,500 or more (minus the cost of the wager)
Poker. Issue the W2-G if the prize is $5,000 or more (minus the cost of the wager)
In may instances, the nonprofit must also withhold taxes, so check with your accountant.
What are the record-keeping and reporting requirements?
Lastly, carefully read the record-keeping and reporting requirements. Pay attention to due dates so you are not fined for late filing.
In general, you must keep these records:
- sales invoices
- gross receipts (the total money you took in) and expenses
- the total value of the prizes paid out
- the total amount of money collect for each game
- how your organization used the money collected
- copies of the W-2G filings made for any prize > $600
- you also must keep a separate bank account for gaming proceeds if you earn more than $40,000 from gaming each year
So, yes, the purse bingo can proceed, but you need to stop by the county treasurer’s office to obtain a permit, keep appropriate records, file reports (when applicable), and file Form W-2G when winners take home sufficiently large prizes. Don’t let the requirements dissuade you. Compliance is not as complicated or time-consuming as it appears.
Contact Concerto Law at (814) 706-1288 if you need help navigating the Small Games of Chance rules. We have helped many organizations stay compliant with the rules.