Is it legal for my nonprofit organization to try to raise funds with a raffle?
Raffles are a great way for a local organization to raise money and engage its members. But whether raffles are legal depends on the nonprofit organization itself. Texas has specific laws that address which organizations can legally conduct raffles.
Under the Texas Charitable Enabling Act, the following organizations can hold raffles: an association organized primarily for religious purposes that has existed in Texas for at least 10 years and a volunteer emergency medical service or volunteer fire department that does not pay members other than nominal compensation. If your nonprofit organization does not fail within this criteria, don’t get frustrated just yet. Other organizations can qualify as long as they have existed for at least 3 years, have a 501(c) tax exemption, elect their governing body, have members, do not distribute income to members, and do not participate in political campaigns.
If your organization can legally conduct a raffle, you should also be aware that the law places other restrictions on raffles. For example, a qualified organization can only hold two raffles per year. Raffle tickets must provide the name and address of the organization, the ticket price, and a general description of each prize that is valued at more than $10. Only members of the organization are allowed to sell the tickets.
Furthermore, money cannot be used as a prize. All proceeds from the sale of raffle tickets must be spent for the charitable purposes of the organization. Because there are numerous other restrictions, a nonprofit organization that is considering holding a raffle should read the entire act, which can be found at www.capitol.state.tx.us (Statutes/Occupation Code Chap. 2002). After reading the act, you should consult a licensed attorney if you still have specific questions that need to be answered.
Conducting a raffle that does not comply with Texas law is a Class A misdemeanor (it’s a Class C misdemeanor to participate in a unauthorized raffle). For more information regarding raffles, take a look at the excellent information put out by the Attorney General’s office at www.oag.state.tx.us, or call 800/252-8011 for a free copy of the charitable raffles brochure.
This article appears in July 9 • 2004.