Because the laws governing gambling and other methods of parish fundraisers are relatively complicated, not always intuitive, and implicate several other areas of law and Archdiocesan policy, and because there have been several recent changes in those laws, the legal office has prepared this summary of the most common issues.
Please remember that this summary is only intended as a guide. You should:
1) Read the accompanying materials carefully well in advance of the event;
2) Follow the indicated cross-references for more information on specific topics, and read those too; and
3) Contact the Archdiocesan Development, Legal and/or Finance Offices, as appropriate, for guidance and additional information.
See, especially, the following documents. These are accessible and downloadable through the Index of Archdiocesan Policies posted on the Archdiocesan website at SFArchdiocese.org):
— Fundraising – Electronic
— Fundraising Policies: IRS Charity’s Guide to Car Donations
— Fundraising Policies: Memo to Agency Heads re: Car Donations
— Fundraising Policies: Pastor’s Memo re: Raffles
These documents contain additional valuable, detailed information on these topics.
Depending on which law is involved, and the nature of the violation, the penalty for failing to comply with government rules can include loss of tax-exempt status, penalties, interest, fines and (in egregious situations) even jail time for the violators.
a. Bingo. Until recently, bingo games were the only legally approved games of chance for a parish. They are still common and permissible, but note the following restrictions: 1) A local permit is required. 2) “Progressive prizes” are not permitted. 3) The game must be conducted entirely by volunteers (although a security person or service can be hired). 4) There are dollar limits on the size of prizes. Please contact your local city authority for information on required forms and restrictions, and allow adequate time to process any required applications prior to your event. A small fee is typically charged for a permit.
b. Casino Nights. “Casino” or “Monte Carlo” Nights are events at which people pay money (directly or indirectly, i.e., through “donations”, bets, a fee pergame, buying “entry tickets” or buying chips, etc.) to play games of chance in which the player has a chance to win something of value depending on the outcome of the game. “Something of value” includes all winnings, whether cash (e.g., in a poker game), “floor prizes” to the person who ends the evening with the most chips, or any other return of value.
These events are considered gambling, and have long been generally illegal. But a new law has been passed that allows certain limited exceptions. Such games are now permitted within the following significant, strict, restrictions (LOCAL governments may also impose ADDITIONAL restrictions):
i) One event per year, no longer than five hours long;
ii) No cash prizes;
iii) Non-cash prizes may not exceed $500 each, or $5,000 in total per event
iv) No more than 10% of gross revenue may go to any entity other than the non-profit, except for facility rental (other restrictions on receipt of funds also apply);
v) Sponsoring Organization must have been in existence for more than 3 years;
vi) Organization must register with the State of California’s Division of Gambling Control, and pay an annual fee (forms available from that agency online or on request);
vii) Organization must maintain records including receipts, list of recipients of funds, number of persons attending, costs, date, hours and location of event;
viii) No slot machines;
ix) No one under age 21 may participate;
x) Game may not be conducted over the internet.
NOTE THAT ONLY THOSE CASINO NIGHTS THAT MEET ALL OF THESE CONDITIONS ARE ALLOWED. OTHERWISE, THEY ARE STILL CONSIDERED ILLEGAL GAMBLING AND ARE PROHIBITED BY LAW!
Because of these and various other regulations, all casino nights must be run by the parish/school/agency (either directly or through an appropriate contract with an outside operating company) and on its behalf. Proceeds may be directed to specific purposes (e.g., men’s club, parent-teacher association, support the soccer team, etc.) so long as these beneficiaries represent bona-fide parish/school ministries. However, the proceeds must be received and owned and used by the parish/school/agency directly, and the parish/school/agency must be responsible for arranging all required registrations, state fees, record-keeping, etc. No outside organization may operate a casino night in the name of, or on the site of, the parish/school or Archdiocese or using parish/school facilities, except where the parish/school has duly contracted with an outside company to operate the event on the parish’s own behalf.
c. Raffles/Lotteries. Prior to 2001, in all games such as raffles and lotteries, it had to be made conspicuously clear that participation is free upon request. That is no longer always true, IF certain conditions are met and certain rules are followed.
i) Pay-For-Tickets Raffles:
The law now provides that raffles may be conducted without “free tickets upon request” by eligible organizations for directly supporting charitable purposes.
Eligible Organizations are private, nonprofit tax-exempt organizations that have been qualified to conduct business in California for at least one year.
Tickets: Each ticket must be sold with a detachable stub with identifying numbers.
Draw: The draw must be held in California under the supervision of an adult.
Proceeds: At least 90 percent of the gross proceeds of the raffle must go for the support of a “beneficial or charitable” purpose, or to support another “eligible organization.” This does not include support of the officers, directors or corporate members of the organization. The remaining 10 percent of the proceeds may be used for administrative expenses of the raffle. The organization may also use funds from other sources for administration of the raffle. No individual or entity except the sponsoring organization itself may hold a financial stake in the raffle.
Staff: Only volunteers or regular employees of the sponsoring organization can act as supervisor of the raffle or sell tickets (that is, no professional consultants such as outside fundraisers can receive compensation in connection with the raffle), and workers cannot be paid from the portion of the money that must go to the charitable purpose.
Internet Raffles: The raffle may not be advertised or conducted over the internet. Tickets may not be sold or redeemed over the internet. However, the raffle may be “announced” on the web site of the sponsoring organization.
Registration and Reporting: The operator must register with and report to the Department of Justice. However, there is an exemption from this requirement that would include all parishes and schools of the Archdiocese, as well as Catholic Charities and CYO.
ii) Old-Style Raffles
The old-style “free on request” raffles still exist and remain exempt from the regulations that pertain to “pay-for-ticket” raffles. To be exempt from the regulations, 1) the raffle must involve a “general and indiscriminate distribution” of tickets (meaning that tickets must be sent/distributed broadly and available freely upon request); 2) free tickets must be offered on the same terms as those tickets for which a donation is given (i.e., free tickets must have the same chance to win); and 3) participants must not have to pay to have a chance to win, and the tickets should make absolutely clear that people may participate at all stages of the event for free. Given the relative simplicity of complying with the new rules for “pay to play” raffles, parishes, schools and agencies are advised to avoid this “exempt” route.
Whichever kind of raffle you have, it bears emphasis that only raffles that either meet all the requirements of the new law, or meet all the requirements of old-style raffles, are legal. No other raffles/lotteries, etc. may be held.
iii) Caveat concerning tickets by mail:
The United States Attorney General has long enforced the federal law that outlaws the use of the U.S. mail for gambling that is illegal under state law. Accordingly, the Postal Service refused to accept mailings that did not comply with the old state law that required tickets to be given away for free. Now, because requiring purchase of raffle tickets no longer makes the raffle unlawful in California, the U.S. Attorney General has notified Congress that the federal authorities will no longer enforce federal laws prosecuting such raffles, and the Postal Service should accept those mailings. However, the regulations governing the use of the mails have not yet been modified to match the new California Law and the Attorney General’s new policy. The bottom line, therefore, is this: Although raffles in which tickets are not offered for free can now be legal under California law (under the circumstances outlined above), the U.S. Postal Service or a local postmaster may not yet accept mailings of such tickets. Unless and until the Post Office changes its stance, our options are 1) offer raffle tickets for free, in accordance with the prior law; 2) conduct raffles without use of the mail, or 3)