At your last 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 charity fundraisers to be gambling. Yes, gambling. That is because the purchase of the ticket involves the chance, but not the guarantee, that you will win the prize.
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.
We are having a raffle. How do we obtain a 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.
Beware Limits on Games and Prizes. Read the law carefully and understand which games you may offer and what prize limits apply. Prize limits vary by game, week, and month.
Use of Proceeds. Now that you hosted a successful fundraiser, what can do you do with those games of chance proceeds? Again you need to carefully read the law. Generally, the proceeds must be used to carry out your organization's "public purpose". In other words, the funds should be used to further your mission.
What is the 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? Federal law requires you to issue a W2-G to persons who win $600 or more and the prize is 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. In some instances, the nonprofit must also withhold taxes, so check with your accountant.
Records and Reporting. Lastly, carefully read the recordkeeping and reporting requirements, paying attention to due dates.
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 report (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.
Christine Jarzab Kuntz is an attorney specializing in the life cycle of businesses and nonprofit organizations. She is enthusiastic to share her knowledge, tools, and tips with the business and nonprofit community. She enjoys the excitement of tutoring start-ups, tackling the challenges of established businesses, and counseling her clients' transitions through all stages of the business life cycle.