NY Charities Win Big in Charitable Gaming Act of 2017By Robert Lyons | Frances McKenna
March 2, 2018
Like charitable organizations across the nation, charities in New York are constantly reaching out to find new sources of income. These efforts often include raffles and other gaming incentives. In New York, the potential to raise funds through raffles has been extremely limited by a very antiquated set of gaming laws, but that is soon to change.
On December 19, 2017, the State Assembly passed – and Governor Cuomo signed into law – the Charitable Gaming Act of 2017 (the “Act”) which modifies and loosens the restrictions on the sale of raffle tickets by charitable organizations, among other changes. The law takes effect 180 days after signing to allow the New York State Gaming Commission time to make the necessary implementation adjustments.
Raffles are considered a game of chance and currently fall under rules established by the state’s Gaming Commission. Prior to the passing and signing of the Act, charities in New York could only conduct raffles on a cash basis, which was impractical and restrictive. With the Act, authorized charitable organizations can publicize raffles online and accept payment for raffle tickets through internet sales (as of June 18, 2018), checks and other non-cash payment options.
Under the Act, charities will also be allowed to accept debit and credit cards as a legitimate form of payment for raffle tickets, which was previously prohibited.
The Act and other recent changes include some additional provisions that will impact charities in various ways, such as:
- Permits charitable organizations to conduct games of chance in additional locations beyond their own premises;
- Reduces the number of years that a charitable organization must be in existence in order to conduct games of chance (from 3 years to 1 year);
- Modifies forms and publications to allow for easier registration;
- Lessens restrictions on advertising sources;
- Increases the prize limitations for bell jars from $500 to $1,000;
- Increases the aggregate prize for a bell jar deal from $3,000 to $6,000;
- Retains one of the categories for raffle registration requirements, while eliminating the other:
- Category 1: All raffles with anticipated net proceeds of more than $5,000 for a single raffle will still require a verified statement of raffle operations (GCVS1) prior to the raffle. Net proceeds of more than $30,000 for cumulative raffles within a calendar year will still require a license and financial reporting.
- Category 2: All raffles with anticipated net proceeds under $5,000 for a single raffle or under $30,000 for cumulative raffles within a calendar year will no longer require a license or financial reporting.
- Authorized charitable organizations will no longer be required to seek specific permission from each municipality in order to sell raffle tickets in a municipality in a contiguous county when that municipality has generally authorized games of chance.
All raffle ticket sales, including online, may only be conducted in municipalities that have passed a games of chance local law, ordinance or resolution and are located within the same county in which the authorized organization is domiciled.
- Raffle Consent Forms must be filed with the NYS Gaming Commission which will then submit the forms to each municipality on your behalf to obtain the requisite authorizations.
Charities still need to be aware of certain tax filing rules when conducting raffles. Rules governing “regularly carried on” activities still apply and may have a negative impact, especially in the area of unrelated business income. Charities also need to be aware of employment tax implications. A tax-exempt organization conducting gaming activities may be required to withhold income tax and report on Form W-2G. (See Pub. 3079, Tax-Exempt Organizations and Gaming.)
As noted above, the Act takes effect 180 days from signing. Once in effect, it will open many new doors for New York charitable organizations and their fundraising plans.
This article was origionally published by NewYorkNonprofit Media
About Robert Lyons
Robert (Rob) Lyons, CPA, MST, is a Tax Director, Exempt Organizations in the Nonprofit, Government & Healthcare Group at Marks Paneth LLP. Mr. Lyons brings to this role the skills he has developed during more than 30 years of providing tax and consulting services to his clients in the nonprofit, higher education, and public sector industries. His experience includes handling substantial exempt organization tax issues. Mr. Lyons has testified in front of the House and Ways Committee in... READ MORE +
About Frances McKenna
Frances E. McKenna, MBA, came to Marks Paneth after twenty six years of service in the Internal Revenue Service (IRS). At the IRS, Exempt Organizations (EO) were her main focus. Ms. McKenna was responsible for a number of high profile national programs, including the Affordable Care Act (ACA), International/Foreign Account Tax Compliance Act (FATCA), Referral, Political Campaign Intervention (PCI), Employment Tax, National Research Programs (NRP), Fed/State, and Gaming. As the manager of the IRS’s EO... READ MORE +