Games of Chance: Fundraising for Nonprofits
Posted by Alexis Bueme on January 15, 2025
Charitable fundraisers featuring games of chance, such as bingo, raffles, baccarat, and roulette, are popular ways for nonprofits to raise millions of dollars annually. However, hosting gambling events comes with certain tax-related responsibilities. Before scheduling a casino night, lottery, or other regulated activity, it's essential to review these rules:
Unrelated Business Income (UBI)
If your nonprofit regularly conducts gaming activities, you may need to report it to the IRS and pay taxes on it. For instance, nonprofits that gross more than $1,000 in UBI from regular gaming fundraisers may be required to file Form 990-T, "Exempt Organization Business Income Tax Return".
Wagering Excise and Occupational Taxes
Your organization could be subject to these taxes depending on the type of wagering, its structure, and how you benefit from the proceeds. Generally, these taxes apply to lotteries or wagering pools involving a sporting event or contest conducted for profit.
Reporting Participant Winnings
Depending on the type of game and the amount won, you may need to report the participant’s winnings to the IRS. This applies if your fundraiser includes a single:
- Instant/pull-tab prize equal to or over $600 that’s also at least 300 times the amount of the wager.
- Bingo or slot machine prize equal to or over $1,200.
- Keno prize equal to or over $1,500.
You should obtain the winner’s name and Social Security number.
Tax Withholding
Regular income tax or backup withholding is necessary for some games with winnings over a certain threshold. No withholding is required for bingo prizes (before deducting the wager) up to $1,200. However, withholding is necessary when raffle and some other types of winnings are at least $600 and are 300 times or more the amount of the original wager. Your organization must pay these amounts, regardless of whether you get the withholding from the winner.
Additional Regulations
This list of IRS rules isn’t exhaustive, and there may be exceptions. Additionally, you may be subject to additional regulations imposed by your state or municipality. For example, you might need to obtain a license or segregate earnings in a separate bank account. Some states and municipalities ban gambling activities altogether.
Ensuring Compliance
The best way to ensure your organization and its fundraising activities remain compliant is to discuss your plans with a professional advisor.
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Lexi was welcomed to the Firm as a member of the audit and assurance department after completing three internships with Lumsden McCormick. As an audit senior accountant, her duties include performing audit fieldwork for both commercial businesses and exempt organizations.