Gambling is generally illegal in the state of Arizona. However, some charitable gambling falls within an exception under state law. Charitable organizations may hold certain types of events involving gambling if they meet specific criteria.
Charitable 50/50 Drawings or Raffles
Arizona charitable organizations can hold raffles and other forms of fundraisers involving charitable gambling without violating state laws prohibiting gambling. Charitable gambling such as 50/50 drawings or raffles is legal only if it follows Arizona law:
- The charitable organization must be tax-exempt under 501(c)(3) of the Internal Revenue Code.
- Before conducting a raffle, the charity must have been in operation for at least five years.
- No member, officer, director, employee, or agent of the charity can benefit from the raffle, although they may participate just like any other participant.
- Only bona fide members of the charity can participate directly or indirectly in the raffle’s sales, management, or operation.
- The charitable organization only can make raffle tickets available online through an organization website that it owns and operates and can only sell the tickets online to people living in Arizona.
Although state law does not require it, charitable organizations should generally publish the raffle rules in all their promotional materials, along with any disclaimers.
The Arizona Department of Revenue regulates and issues licenses for running charitable gambling events in the form of bingo games. Three different types of bingo licenses are available.
- Class A licenses are for recreational and social purposes, in that they return all gross receipts to the players in prizes. They can have no more than $75,000 per year in gross receipts and are taxed at 2.5% of their adjusted gross receipts.
- Class B and C licenses are for charitable organizations to raise funds. These licenses are taxed on their gross receipts rather than their adjusted gross receipts.
- Class B licenses have gross receipts of no more than $500,000 per year and are taxed at 1.5% of their gross receipts.
- Class C licenses have gross receipts of more than $500,000 per year and are taxed at 2% of their gross receipts.
Arizona law also sets out various other rules and regulations for conducting bingo games as charitable gambling, including who may conduct them, where they may occur, when they may occur, and how often they may occur. For instance, once you have a license to conduct bingo at a particular location, you must get a new license if you want to hold bingo at a different location, even temporarily. In addition, organizations may not operate more than five occasions of bingo during any calendar week, and no more than 12 hours of bingo in one location per calendar day.
Charitable organizations sometimes hold use charitable gambling in the form of poker tournaments to raise funds. Arizona law permits charities to operate poker tournaments or games into two different situations:
- A charity can sponsor a poker tournament based on donations from players. However, in this type of fundraiser, the charity must allow individuals who choose not to donate to the charity the same right to participate in and win in the tournament as those who donate. Likewise, the amount of a person’s donation may not determine how many chips they receive to play in the tournament; if the charity gives the players chips, they all must receive the same amount, whether they donate or not. The tournament also cannot require buy-ins or re-buys.
- A charity can hold a poker tournament as part of a charitable raffle. The players buy raffle tickets or poker chips redeemable for raffle tickets, which they then use to play poker.
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