Is your association breaking the law? 50/50 raffles are fundraisers commonly hosted by community associations. These raffles are often very successful and generate significant engagement as half the proceeds go to the raffle winner. However, if your association is hosting a 50/50 raffle, the association is most likely breaking the law. This blog will provide an overview of the legal pitfalls of the 50/50 raffle and how your association may be able to host one while staying on the right side of the law.
Is a 50/50 Raffle Gambling?
Community association fundraisers are not uncommon events in Florida. Many associations utilize these fundraisers to help raise money for certain projects, so 50/50 raffles are a relatively common method used by associations to do so. However, a 50/50 raffle is likely considered gambling under Florida law and your association should be careful not to violate Florida laws by sponsoring one.
A 50/50 raffle must comply with § 849.0935 of the Florida Statutes. This statute sets forth the requirements to legally host a 50/50 raffle and other similar gambling-type events or fundraisers. Under § 849.0935, Fla. Stat., the association hosting the raffle must meet the statutory definition of an “organization”. Pursuant to § 849.0935, Fla. Stat., an “organization” is “an organization which is exempt from federal income taxation pursuant to 26 U.S.C. s. 501(c)(3), (4), (7), (8), (10), or (19), and which has a current determination letter from the Internal Revenue Service, and its bona fide members or officers.” While community associations are Chapter 617 not-for-profit corporations, most community associations are not IRS 501(c) charitable organizations. Meaning most associations would be in violation of Florida law by hosting a 50/50 raffle.
Can Your Association Become an IRS 501(c) Organization?
As this article has previously discussed, community associations are typically Ch 617 Florida not-for-profit corporations. Not-for-profit status, however, is not synonymous with IRS 501(c) charitable organization status. This does not mean that a community association cannot also be an IRS 501(c) charitable organization. In fact, there are many Florida community associations that hold IRS 501(c)(4) or IRS 501(c)(7) status. These associations could legally hold a 50/50 raffle, provided the other statutory requirements are met.
If your association wants to host a 50/50 raffle, it should first obtain the IRS 501(c) charitable organization status. While this may seem like a daunting task, IRS 501(c)(4) or IRS 501(c)(7) status is attainable for many community associations. Jimerson Birr’s community association and tax attorneys can help your association determine which IRS status is most suitable for the organization as well as assist the association in navigating the application process.
How to Legally Conduct a 50/50 Raffle
For those associations that are approved 501(c) organizations under the Florida statute, there are certain rules that must be followed to legally conduct a 50/50 raffle. First and foremost, as stated above, the association conducting the raffle and receiving the funds must be an IRS 501(c)(3), (4), (7), (8), (10), or (19) organization holding a current determination letter from the IRS. § 849.0935(1)(b) Florida Statutes. Second, all brochures, advertisements, notices, tickets, or entry blanks used in connection with the raffle must conspicuously disclose:
- The rules governing the conduct and operation of the drawing;
- The full name of the organization and its principal place of business;
- The source of the funds used to award cash prizes or to purchase prizes;
- The date, hour, and place where the winner will be chosen and the prizes will be awarded, unless the brochures, advertisements, notices, tickets, or entry blanks are not offered to the public more than 3 days prior to the drawing.
- That no purchase or contribution is necessary.
The last requirement, (e) is perhaps the most important for associations to note. While, the association may suggest a minimum donation, it is unlawful to require an entry fee, donation, substantial consideration, contribution, or the like as a condition of entering the raffle. § 849.0935(4)(b) Florida Statutes. While 50/50 raffles are not the highest priority gambling issue for the IRS, it is important that your association remains compliant with both Florida and federal law when conducting a 50/50 raffle or another similar fundraiser.
Conclusion
While a 50/50 raffle may seem like a great fundraiser, community associations should be careful not to host or sponsor these raffles in violation of Florida law. The experienced community association attorneys at Jimerson Birr can help your association determine if it can host a 50/50 raffle, what steps it needs to take to do so legally, as well as evaluate other methods of fundraising that may be more suitable for the association. Additionally, the tax team at Jimerson Birr may be able to help your association obtain an IRS 501(c) designation.