It’s a gamble

April 9, 2013

Different groups, from scouts to schools to fire departments and clubs have raised money through raffles and drawings for years. Periodically, someone becomes involved in whatever group governs them who questions whether or not these drawings are legal. Invariably, that results in a call to either the County or District attorney - - and the answer received is not always appreciated!
The basic rule in Texas is that gambling is illegal. 8 liners and the like are a complex issue which needs to be addressed by the Legislature; the laws relating to raffles have been set for many years and rarely receive a new interpretation. The simple rule concerning these is…don’t do it.
Texas works under a law known as the “Charitable Raffle Enabling Act”. This is frequently misinterpreted to mean that any charity may hold a raffle without consequences. In reality, only “qualified organizations” may hold a raffle with a clear conscience. Those who have read this far and nod with an awareness of the requirements to be a qualified organization probably hold legal raffles. Those who are scratching their heads are quite possibly in trouble.
A qualified organization is defined as “a qualified religious society, qualified volunteer fire department, qualified volunteer emergency medical service, or qualified non-profit organization.” The next question has to be – how does one qualify?
A religious society is considered eligible if it has been in existence for at least ten years and does not distribute any of its income to its officers, directors, or members. An exception is made for compensating a person for services rendered or reimbursement for expenses. Fire departments and emergency medical services must be purely volunteer, with no compensation or income going to the members. They must be in the business of fighting fires or providing medical services. After the passage of this law, a couple of “volunteer” agencies near large communities found themselves facing criminal penalties. At one time, they were bona fide groups that existed to serve the public. As metropolitan areas spread and included their territories, the fire and EMS departments began to emphasize the social aspects of their association more than the original purposes. By the time the legal actions began, fewer than half the persons listed as members had the training necessary to do the work. They were determined to no longer be “qualified” volunteer fire departments or emergency medical service providers – and not able to legally hold raffles.
The rest of the groups are a little harder to define. The law requires that these groups either be a locally organized chapter of a national organization or be a nonprofit which originated in the State of Texas. The local chapter must be more than a mere affiliate; it must be wholly under the “umbrella” of the parent organization, sharing in its nonprofit status. Members, officers and directors cannot be compensated (except as may be reasonable for services rendered), and no more than 10% of the income of the group may be used for political purposes. If the group only gives “lip service” to the parent group by paying dues and following regulations that govern only some of its local activities, then it will probably not be able to legally hold a raffle in Texas.
Organizations that are not part of a national nonprofit must qualify under Texas law to hold a raffle. They must have existed in Texas for at least three years, and as with the other organizations, may not compensate members or directors with the income, nor may they spend more than 10% of their income for political purposes. They must hold a valid 501(c) tax exemption certificate.
Most of the groups that desire to hold a raffle try to fall under the last section – unaffiliated nonprofit organizations organized on a local level. When their representatives call to insure that the raffle is legal, the three year requirement causes most to sigh and hang up. The others give up when the tax exemption is mentioned. For your own sake – if your church or favorite charity wishes to hold a raffle, take the time to make certain that you are a “QO” - - a qualified organization. Once qualified, take the time to be aware of the rest of the regulations, including how often raffles may be held, use of the proceeds, limitations on promotions, restrictions on the prizes, and information which must be printed on the tickets.

Lisa Peterson is the County Attorney for Nolan County. Comments about this column may be e-mailed to editor@sweetwaterreporter.com.

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