Q: What is a raffle?
A: As described by the Charitable Gaming Division of the Michigan Lottery: “If you are charging people or requiring them to donate or provide something of value to participate in a drawing where a prize will be awarded, then you are conducting a raffle.” See Raffle Guide, state of Michigan Charitable Gaming Division, page 1, at: http://www.michigan.gov/documents/BSL-CG-1824_26045_7.pdf. They are games where you (1) give something of value, (2) for a chance, (3) at a prize. Events where you compete, based upon skill, for a prize (such as a poker tournament), are not raffles. Events of this sort may fall under other regulatory requirements and prohibitions, but they are not raffles. Events where a person has a chance at a prize but does not give something of value are called promotional or game activities. These, too, have their own set of regulatory requirements.
Q: Is there any difference between a raffle and a lottery?
A: Not really, at least for state regulatory purposes. Both involve giving something of value for a chance at a prize. The criminal statutes and court cases discussing them tend to use the terms “lottery” or “gift enterprise”. The civil, administrative statutes and related court cases tend to use the term “raffle”.
Q: Are there different types of raffles?
A: The state of Michigan has two types of raffles for regulatory purposes. One type is governed under the state’s Bingo Act (“Bingo Act raffles”). The other type is called a promotional raffle or game promotion and must meet a different set of state law requirements.
At the University, raffle questions arise in three types of settings. These are: research incentives, fundraising, and activity promotions. Fundraising raffles must comply with the Bingo Act.
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Q: Are there other types of fundraising games that require a license?
A: Yes, the Bingo Act also provides licensing for Millionaire Parties and Bingo. Millionaire Parties can include several or just a single card game (such as Texas Hold ‘Em) plus other kinds of gambling games. These too are regulated by the state of Michigan’s Bingo Act. These activities have very similar licensing requirements as for raffles.
Q: What is needed to comply with the Bingo Act for fundraising?
A: Except for a few, limited, exceptions the Bingo Act requires a license for raffles, Millionaire Parties, Bingo and other games such as “Charity Games” and “Numeral Games”. Very strict requirements must be met before the state will issue a license. An applicant for a license must represent a “qualified organization”. Strict financial record keeping is mandated. The “principal officer of the organization” must sign the application, and, ultimately, must certify an accounting for all the money, resources and reports related to the game. The various reporting requirements are not trivial and require the signing individual to personally certify the accuracy of the information, prepare and handle various tax withholding documents, and file returns with the state. OGC recommends that you review the requirements carefully before making any decision on proceeding with a licensed game event.
The application forms required by the state’s Charitable Gaming Division differ slightly depending upon the particular game. Application forms and the final report forms can be found on the Charitable Gaming Division web site at: http://www.michigan.gov/cg/.
Q: Are there restrictions for holding a poker tournament, such as a Texas Hold ‘Em tournament?
A: If the poker tournament is a fundraiser for a “qualified organization”, a license under the state of Michigan’s Bingo Act must be obtained. When prizes are given randomly based upon participation in the event, the prizes are a game promotion and no license is required. However, if the tournament is not a fundraiser for a qualified organization and prizes for winners are given out, only a licensed casino can hold the event.
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Q: Is the University of Michigan a “qualified organization” and are there other “qualified organizations” that could apply for a license? Who can sign the application?
A: The University of Michigan is a “qualified organization” under the applicable statute and administrative rules. The state has rejected applications made by a U-M dean as not being signed by the principal officer of the organization, but has accepted applications signed by the Executive Vice President and Chief Financial Officer.
Generally, unincorporated groups, such as most student organizations, will not be eligible for “qualified organization” status. Student groups interested in general fundraising strategies may contact the Office of Student Activities and Leadership at: 734-763-5900. University units interested in fundraising may wish to discuss the matter with the unit’s development coordinator or with central development.
Q: For U-M institutional fundraising activities, what does the Executive Vice President and Chief Financial Officer (“EVPCFO”) require before signing an application for a raffle license?
A: Generally, the University strongly disfavors using raffles as an institutional fundraiser. There are some exceptions, provided the Vice President for Development (“VPD”) recommends to the EVPCFO that the raffle proceed, the VPD oversees or arranges for oversight of all raffle activities, and the EVPCFO approves of the exception. The VPD will consider recommending an exception when (1) a high-level donor or senior University official is personally involved in the fundraising event, (2) the unit development office supports the raffle as a University fundraising event, (3) the item or items to be raffled are of significant value and are expected to raise significant funds, and (4) there are no negative factors that would diminish U-M’s reputation by its sponsorship of the raffle. Other unique factors would be considered, but only on a case by case basis.
If you and your unit wish to pursue a fundraising raffle, forward the request to the Vice President for Development along with the reasons supporting the raffle and the methods, which are to be coordinated through the unit development office, to be used to ensure accountability as required by the license from the state of Michigan.
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Q: For raffle winners, what tax laws must be followed?
A: All winnings are taxable and must be reported as income by persons that must file a federal or state tax return. Winnings include cash prizes and, for non-cash prizes, the fair market value of the prize. For some raffle winnings and winners, tax laws require withholding a percentage of the winnings by the raffle organizers. If the prize is a non-cash prize, the raffle organizer must obtain cash or a check for the required withholding prior to turning over the prize. Yet additional tax laws may require tax reporting, even though withholding may not be mandatory.
If a winner is a United States citizen or foreign national permanent resident, winnings over $600 trigger reporting requirements. Winnings over $5,000 trigger mandatory withholding requirements. Please contact the University’s Tax Management Department to obtain the appropriate forms for withholding and/or reporting. If a winner is a non-resident foreign national, every winning requires certain reporting and withholding requirements. The University community is a diverse one. OGC recommends having available at the raffle drawing IRS Form W-8BEN which must be completed by a non-resident foreign national winner. It is obtainable at http://www.irs.gov/pub/irs-pdf/fw8ben.pdf. And, for the non-resident foreign national winner, you must withhold 30% of the winnings. Contact the University’s Tax Management Department for additional information on processing the forms and the withholding for non-resident foreign national.
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Q: Our student organization is interested in using a raffle or some gambling event for fundraising. How do we go about this?
A: Most events of this type require obtaining a license from the state. Only “qualified organizations” can apply for a license. Generally, unincorporated groups, such as most student organizations, will not be eligible for “qualified organization” status. Student groups interested in general fundraising strategies may contact the Office of Student Activities and Leadership at: 734-763-5900.
Q: What qualifies for the promotional or game activity exceptions?
A: A promotional or game activity is an event where you have a chance at a prize - - BUT you don’t have to provide something of value to obtain the chance. The promotional activity must be clearly occasional and ancillary to the primary business of the activity organizer. It must also be “calculated to promote” the business of the activity organizer. For example, the Michigan Union could hand out raffle tickets to persons on the Diag which, if turned in at some 100 year anniversary ceremony at the Union, gives the person a chance to win a new Blu-ray DVD player. The raffle ticket (or some other related game paraphernalia) must also inform the person of the prizes to be awarded and other details related to the raffle.
Q: Can you offer a chance at a prize in exchange for a person filling out a research survey?
A: Yes, but there are several requirements that must be met. The research protocols must meet both U-M institutional requirements related to human subject research and state regulatory requirements related to raffles. For surveys where the prizes awarded in any one day have a value of $100 or less, the state regulations allow streamlined procedures. All other situations are considerably more involved. Fortunately, the Institutional Review Boards have incorporated the state regulatory requirements into its processes for handling the human subject research oversight. The U-M Institutional Review Boards’ contact information is found at: http://www.irb.research.umich.edu/.
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