Raffle Regulations
Raffle ticket drawings are considered games of chance. Raffles can bring in a good sum of money for a nonprofit organization, especially if valuable items such as a car or a vacation are donated for the raffle. When raffles are used to raise charitable funds, there are stringent laws that the organization must adhere to.
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State by state
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Each state has its own laws for fundraiser raffles. Some states are very lax about raffles and others have stringent laws. Some states define charitable raffles the same as lotteries and therefore have deemed them illegal. Other states allow raffles for charities but do not have lotteries. So, to avoid confusion or prosecution, it is imperative that you find out the laws in your state before holding a fundraiser raffle or lottery.
Define raffle
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The definition of a raffle can mean something different in each state. Generally, raffles are defined as a person purchasing tickets for a random drawing where there is a chance of winning a prize. For for-profit businesses that have such contests, they are defined as a sweepstakes or a lottery. For your state's specific definition of a raffle, go to your state's government website or contact city hall.
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Licenses and permits
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Some states require a license to hold a fundraiser raffle, and for those that do, a fee is usually required. Nonprofit agencies may need to apply for a permit in advance. Be sure to contact your state and local government to find out if your organization needs to file for a license before putting effort into doing a raffle.
Requirements
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There are specific laws in each state as to the type of organization allowed to have a raffle and how the raffle may be held. Some states require that the organization has existed for a minimum amount of time before acquiring a license to hold a raffle. There are also laws about how many raffles can be held within a given year. The value of the prize awarded and the format of raffle tickets sold are considered by each state as well. All organizations, no matter which state they are in, are required to report raffle costs, withholdings and profits to the Internal Revenue Service at tax season.
Proceeds
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For a raffle to be legal, the proceeds must benefit a registered charitable organization or school. An organization may use a portion of raffle proceeds to pay necessary expenses for conducting the raffle; however, you will raise more money and have a more successful fundraiser for your cause if prizes and other needs are donated.
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