Tiffani Mensch is ABN's Director of Education & Outreach. With 15 years of experience in the nonprofit sector, Tiffani is passionate about helping organizations achieve greater mission impact. If you would like to contribute to the ABN Blog, contact Tiffani at firstname.lastname@example.org.
Hosting a Charitable Gaming Event? Read This First!
By Tiffani Mensch on May 29, 2018
The Alliance for Better Nonprofits recently hosted Mr. Joe Roberts from the Tennessee Secretary of State’s Division of Charitable Solicitations, Fantasy Sports and Gaming, who covered many topics relevant to nonprofit organizations planning to host a fundraising event. His presentation was extremely informative and we thought it would be a good idea to share some of the details with our readers! Mr. Roberts covered numerous topics ranging from navigating State compliance to applying for annual charitable gaming event permits, and explained how to best use his Division as an effective resource. Many organizations may not realize they are hosting illegal events, and, if in violation, could face a fine as large as $5,000 per occurrence. We have listed some of the key takeaways below to help your organization remain compliant with state law.
Raffles and games of chance are considered gambling and is prohibited in Tennessee, and certain events hosted by your organization may be considered a raffle if the participant is required to purchase a ticket for a chance to win a prize. It might surprise you to learn exactly what is considered a game of chance, because this can include events like golf tournaments or silent auctions. Events such as bingo or ‘casino nights’ are NOT allowed unless they are purely recreational in nature. This means that participants are not required to pay to participate, nor can you promise a prize or jackpot at any point during or after the event. It also does not matter if the payment is called a “donation.” An event is considered a raffle is someone pays for a chance to win a prize; if it is an optional donation, it would still be considered a violation.
The current law allows 501(c)(3) and 501(c)(19) organizations to host one annual game of chance, but they must apply and be approved by two-thirds vote of the State General Assembly. Authorized events include raffles, reverse raffles, and cakewalks or cake wheels. A qualified organization may conduct one event during an event period, which runs from July 1st through June 30th of the following year. They must also have the appropriate documentation from the IRS recognizing its exemption status, and must have been continuously active in Tennessee for a minimum of 5 years. The event must be operated for the benefit of a 501(c)(3) or 501(c)(19) organization located in Tennessee, and cannot be managed or conducted by a third party. Staff and volunteers must be actively involved in the planning and overall operation of the event.
There are also individuals who are not allowed to purchase tickets, which can be easy to overlook in the spirit of fundraising. These include any member of the board of directors, officers, or employees, or any immediate family members that reside in the same household as the previously listed individuals. Members of the General Assembly, Secretary of State, or related employees during the office term are also forbidden from purchasing tickets. These restrictions also extend to any vendors, agents, or subcontractors who provide services, supplies, or prizes to the event.
To apply for an event an organization must submit an application and any supporting documents to the Division of Charitable Solicitations’ Nashville office between July 1st and January 31st. A non-refundable fee is required and is based on the projected gross revenue of the event. This ranges from $150 for events under $5,000 to $600 for events expected to raise over $20,000. Once an organization has been approved, they can begin selling tickets 120 days before the event. In addition, a financial report must be filed 90 days after the event’s listed date in the application. If the gross revenue exceeds $50,000, an audited financial statement is also required. Applications, additional forms, and instructions can be found at the Tennessee Secretary of State’s website: sos.tn.gov. Follow the ”Charitable” pull-down menu at the top of the page to find gaming information, forms, FAQs, and other helpful gaming links.
The basic checklist includes:
- Completed application
- IRS Tax Exempt Determination Letter
- Current copy of IRS Form 990 (if required)
- List of officers, directors, or functional equivalent
- Description of the game, including;
- How the event will be conducted?
- What will the tickets be drawn from?
- Who will draw the tickets?
- Are the prize winners required to be present to win?
- Application fee
To learn more, visit the Tennessee Secretary of State’s Division of Charitable Solicitations, Fantasy Sports and Gaming website at sos.tn.gov/charitable, or call the division number at (615) 741-2555.