Nonprofit organizations often hold annual or periodic fundraisers to supplement their budgets. Common fundraising activities may include holding raffles. In California, eligible tax-exempt nonprofit organizations must be eligible under state law to hold a raffle and comply with certain registration requirements, with some exceptions.
The California Center for Nonprofit Law stays abreast of all state and federal law requirements that may affect your nonprofit organization, including those that may affect your fundraising efforts. Keep your nonprofit compliant by calling our office for the legal advice you need today.
Understanding Raffles
Raffles occur when individuals purchase chances to win prizes using paper tickets with identifying tickets and detachable stubs. The entity holding the raffle then draws ticket stubs randomly to determine the winner. California law places no limits on the value of prizes that may be won in a raffle. The eligible tax-exempt organization must use at least 90% of the gross receipts from the raffle ticket sales to benefit or support charitable purposes in California.
Raffles must be supervised by a person who is age 18 or older. Organizations may not use gaming machines, apparatus, or devices like slot machines to award raffle prizes. Organizations also may not conduct raffles via the Internet, although they may advertise raffles using the Internet.
Eligibility to Hold a Raffle Under California Law
Under California Penal Code section 320.5(c), organizations are eligible to hold raffles in California if they are private nonprofit organizations qualified to conduct business in California for at least one year before conducting a raffle. Organizations also must be tax-exempt under Sections 23701a,23701b, 23701d, 23701e, 23701f, 23701g, 23701k, 23701l, 23701t, or 23701w of the California Revenue and Taxation Code. Tax-exempt status for eligibility to conduct a raffle in California is not measured by tax-exempt status under federal law.
Registering to Hold a Raffle in California
Generally, organizations that wish to hold raffles in California must register with the California Attorney General’s office. However, nonprofit religious organizations, schools, colleges, and hospitals are exempt from the registration requirements.
Organizations that wish to hold a raffle in California and are subject to registration requirements must complete an Application for Registration (CT-NRP-1) and submit it to the Department of Justice, Office of the Attorney General, Registry of Charitable Trusts. They also must submit a Franchise Tax Board “entity status letter” and a $30 registration fee made payable to the Department of Justice. To avoid Registry backlogs, organizations that wish to hold raffles should submit their applications and other required materials at least 60 days before their planned raffles.
Upon approval, the Registry of Charitable Trusts will send a letter confirming the raffle registration. The confirmation letter will include a raffle permit number and expiration date.
Organizations should keep in mind that raffle registration is a separate registration requirement from charity registration requirements. Reporting requirements for raffles are also separate from those required by the state for charities.
Steps to Take After a Raffle in California
After an organization has held all its raffles during the year it has registered, it must prepare and submit a Nonprofit Raffle Report (CT-NRP-2) to the Registry of Charitable Trusts. The registration year for raffles and submitting reports is the calendar year, running from January 1st to December 31st. Organizations must submit their Nonprofit Raffle Reports by February 1st of the year following the registration year. As with the registration requirements, nonprofit religious organizations, schools, colleges, and hospitals are exempt from the reporting requirements.
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The California Center for Nonprofit Law dedicates its efforts to the daily legal matters that nonprofit organizations face, including ongoing compliance with changes in the law. Call us today at (949) 892-1221 and schedule a time to discuss your case. Get your questions answered and learn more about how we can help.
