Question: At the end of the year the FFA Class and the Athletics Class hold a Banquet Dinner. They sell tickets to the dinner for $10.00, with this $10.00 you get dinner. Then when you are at the Banquet you can buy a ticket for $5.00 to have a chance to win one of the items that were donated. I know that the ASB class cannot hold raffles, so going forward, can the two classes hold the Banquet Dinner and charge $15.00 for dinner and a chance to win a prize that was donated to the Banquet.
Response: School entities, including student clubs, are not authorized to participate in raffles because, unlike the local PTA or booster club, they are not nonprofit organizations exempt from state tax as defined in the Franchise Tax Code. Rather, school entities are exempt from tax by virtue of being a government entity.
It is possible for a private, non-district, non-ASB nonprofit group, such as a parent group, education foundation or booster club, to conduct raffles as long as the organization is a tax-exempt nonprofit organization with an approved tax identification number pursuant to Revenue and Taxation Code 23701d. The organization must have been licensed to do business in California for at least one year, must register with the Attorney General's Registry of Charitable Trusts and must receive written confirmation of the annual registration before holding the initial raffle. These nonprofit groups must register every 12 months and distribute at least 90% of the profits to beneficial or charitable purposes. They must also submit an annual report with gross receipts, expenses, net profit and the charitable purpose for which they used the money. The raffle tickets and stubs must be numbered, and adults must supervise the drawing, which may not be conducted over the Internet.
What you are describing above, adding the $5.00 to the purchase price in order to keep having the raffle, does not make it legal. Clearly the precedent is set that the dinner is $10.00 and the "chance to win" $5.00, so combining the two is clearly a way to try to get around the law. The only way to have a legal raffle is to work with an eligible nonprofit organization that has its own tax identification number, registers with the Attorney General annually and disburses 90% of the profits to a charitable purpose. So, unless a nonprofit organization is willing to sponsor the raffle/chance to win, it needs to be discontinued.
On the other hand, a silent auction would be allowable, as although people are bidding against each other, the one person that ends up paying a price is the person who will actually take the item(s) home. There is no one paying for a chance to win.
10/27/09
