Q: We have a booster club that wants to do a raffle fundraiser. I checked and they are not a 501(c)3 organization. Is this something they can legally do?
A: No. Under the Texas Charitable Raffle Enabling Act (“CREA”), only qualified nonprofit organizations may conduct raffles to benefit a district or a specific school. Additionally, the CREA sets out specific regulations regarding how a raffle must be conducted.
The CREA defines a raffle as “the award of one or more prizes by chance at a single occasion among a single pool or group of persons who have paid or promised a thing of value for a ticket that represents a chance to win a prize.” Tex. Occ. Code § 2002.002(6). The CREA also sets out a very particular subset of groups that are allowed to conduct raffles including a qualified 501(c) tax-exempt, nonprofit organization that has been in existence for at least three years, qualified religious societies, qualified volunteer fire departments, and qualified volunteer emergency medical services.
To be considered a “qualified nonprofit,” the organization must meet the requirements set out in Texas Occupations Code Section 2002.003, which includes not distributing income to any of its members (other than as reasonable compensation for services), being in existence for the three preceding years, not devoting a substantial part of its activities to attempt to influence legislation or participate in political campaigns, qualifies for and has obtained 501(c) exemption status from the Internal Revenue Service, and does not have or recognize any local chapter, affiliate, unit, or subsidiary organization in the state. This information should be submitted to your business department annually, consistent with Booster regulations and/or policy GE (LOCAL).
Assuming you have a qualified nonprofit organization asking to conduct a raffle, it is important to note that each qualified organization is only allowed to hold two raffles per calendar year. Additionally, all proceeds from raffles must be used for the charitable purposes of the organization. The following must be included on each printed ticket: (1) the name of the organization conducting the raffle; (2) the address of the organization or a named officer of the organization; (3) the ticket price; (4) a general description of each prize having a value of more than $10 to be awarded in the raffle; and (5) the date on which the raffle prize or prizes will be awarded. Cash prizes are prohibited and the value of each purchased prize may not exceed $50,000. There is not a similar limit on the value of donated prizes.
For additional information pertaining to fundraisers and related regulations, look to policy GKB. For specific questions, please contact your local school attorney.