How to Conduct Charitable Gambling
Minnesota law states that only nonprofits registered with the Secretary of State or IRS can conduct any charitable gambling efforts. These nonprofits can apply for a license through the Lawful Gambling Control Board. Currently, the Gambling Control Board has approved five forms of gambling: pull-tabs, bingo, paddlewheels, tipboards and raffles.
The following information about charitable gambling is adapted from Charitable Gambling: An Overview by the Minnesota House of Representatives.
Who can conduct charitable gambling?
Minnesota law states that only nonprofits registered with A charitable, religious, veterans or other nonprofit organization may be licensed to conduct charitable gambling if it has at least 15 active members and has been in existence for at least three years. About 1,400 Minnesota organizations are licensed to conduct gambling at about 3,300 different locations.
Regulating Charitable Gambling
Charitable gambling is regulated by the seven-member Lawful Gambling Control Board. It licenses organizations and gambling managers and makes rules for the conduct of gambling. It also regulates bingo halls and the distributors and manufacturers of gambling equipment.
What can gambling proceeds be spent for?
Gross gambling profits can only be spent for gambling expenses and lawful purposes. Gambling expenses are all expenses directly related to the conduct of gambling. Examples are gambling supplies, rent, license fees and wages of gambling workers. Expenses are limited to 70 percent of gross profits for bingo and 60 percent for other gambling. Gross profit not spent for expenses can only be spent for lawful purposes, which include:
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Expenditure by or contribution to a 501(c)(3) organization or a 501(c)(4) festival organization
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Contributions to relieve poverty, disability, or homelessness
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Compulsive gambling treatment
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Scholarships and contributions to educational institutions
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Recognition of humanitarian or military service
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Recreational and athletic facilities primarily for young people
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Property taxes on gambling premises
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Contributions to government
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Contributions to or expenditures by a religious institution
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Snowmobiles and ATV trails and wildlife management projects
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Food shelves and dining programs primarily for older persons
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Community arts organizations and programs
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Utilities for veterans’ organization buildings
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Recognition dinners for veterans, up to $5,000 per organization annually
Rules for Charitable Gambling
Gambling must be supervised by a gambling manager appointed by the organization. Players must be at least 18 years old and can not use checks or play on credit, except checks for raffle tickets. Odds and house rules must be posted on the premises and compensated gambling workers must be registered with the board and may not gamble at sites where they are working, with some limited exceptions.
Prize Limitations for Charitable Gambling:
Prize limitations are as follows:
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Bingo, $200 per game and $2,800 for most bingo occasions
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Single pull-tab, $599
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Single paddlewheel prize, $70
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Largest tipboard prize, $599
Gambling that is Exempt from Licensing
Organizations do not have to obtain a license if gambling is conducted for five or fewer days a year with total prizes not exceeding $50,000. No license is required for bingo conducted at fairs for up to 12 days a year and bingo conducted elsewhere for up to four days a year. Raffles with a prize of no more than $1,500 also do not require a license.
A New Raffle Option
The Minnesota legislature’s 2013 tax omnibus bill included a provision which provides a new raffle option for 501(c)3 organizations which conduct only one raffle per year. This law, that went into effect July 2013, exempts 501(c)3 organizations from registering with the Minnesota Gambling Control Board if: An organization hosts only one raffle in a calendar year If the total fair market value of prizes awarded in raffle does not exceed $5,000 For example, if your nonprofit organization holds one raffle per year and raffles off a single item (or combination of items) totaling less than $5,000 in value, it is exempt from registration. The value of the raffle cannot exceed $5,000; however, the amount of money the organization raises is not restricted. If an organization conducts raffles where the drawings are held on more than one date or wishes to conduct other forms of lawful gambling, the organization must apply to the Gambling Control Board for an exempt permit. Once an organization confirms that it will host just one raffle in a calendar year, it cannot change their status for that year. This means that if your organization chooses to host one event with the $5,000 value raffle option, it may not later apply for an exempt permit in the same calendar year and vice versa. Organizations should plan their full year of raffle activity and the value that is expected to be given away, in order to determine whether they will be required to register in that year or not. If you think your organization will give away more than $5,000 in raffle prizes you should register with the Gambling Control Board. Contact their licensing division for further details and assistance, at 651-539-1900.
Other Resources
Minnesota Gambling Control Board
Minnesota Alliance on Problem Gambling