Nonprofit & Government Times Q1 2020

CONCLUSION

The licensing process is rather lengthy, so organizations should plan well in advance to ensure they complete the application process for the raffle. In New Jersey, no organization can award a prize that has a retail value of more than $100,000 in any one raffle. There is also a 12-month limit of $500,000. Following the raffle, the organization responsible has to file a report with the Legalized Games of Chance Control Commission during the calendar month after the month of the raffle. This report should show the gross receipts, the expenses and the net profit. The organization is also required to provide details about how the money is to be used. The Commission retains the right to impose fines on any organization that has not complied with the statutory rules.

Gambling activities such as raffles can be a successful activity for charitable organizations looking to reach their fundraising goals, so long as an organization understands that advanced applications may be necessary and strict filing requirements may be triggered on a state or federal level. While the requirements are considerably more stringent in New York, both jurisdictions (New York and New Jersey) monitor gaming activity very carefully, so the rules should be followed closely in order to avoid issues with the states. On a federal level, the IRS has requirements concerning the relationship of the event to the exempt purpose and issues with inurement, so these must also be considered. Not-for-profit organizations looking to utilize gaming activities certainly don’t want to gamble with their exempt status or risk having any tax issues arise later on.

1. Hardison v. Coleman , 121 Fla. 892, 164 So. 520 (1935).

Magdalena M. Czerniawski, CPA, MBA , Tax Partner in the firm’s Nonprofit, Government & Healthcare Group, provides tax services to a wide array of nonprofits, including charitable organizations, social welfare organizations, professional associations and private foundations. She specializes in matters related to ASC 740-10 (FIN 48), the reporting requirements that govern contributions, compensation, unrelated business taxable income, lobbying costs, and public support testing. Magdalena can be reached via email at mczerniawski@markspaneth.com or at 212.324.7026.

Robert Lyons, CPA, MST , a Tax Director in the firm’s Nonprofit, Government & Healthcare Group, brings more than 30 years’ experience providing tax and consulting services to the nonprofit, higher education and public sector industries. Rob can be reached via email at rlyons@markspaneth.com or at 212.710.1736.

markspaneth.com FIRST QUARTER, 2020 Nonprofit & Government Times 21

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