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Lions Tax and Raffle Issues

Issues for Today. What is a 501(c)(4)?What is a 501(c)(3)?What do we need to know about raffles?. Caveat. By the very nature of this limited discussion, we will be talking about generalities which may or may not apply in a given situation. This presentation should NOT be relied upon as legal

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Lions Tax and Raffle Issues

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    1. Lions Tax and Raffle Issues Lion Barry J. Boline, J.D. March 19, 2011

    2. Issues for Today What is a 501(c)(4)? What is a 501(c)(3)? What do we need to know about raffles?

    3. Caveat By the very nature of this limited discussion, we will be talking about generalities which may or may not apply in a given situation. This presentation should NOT be relied upon as legal advice. I would encourage you to contact an attorney or tax professional for your particular situation.

    4. What is §501(c)? Internal Revenue Code § 501(c) Tells us what type of entities don’t have to pay Federal Income Tax Provides rules for keeping tax-exempt status There are 24 different exemptions in §501(c) We’ll deal with two §501(c)(4) §501(c)(3)

    5. §501(c)(4) Local employee associations Civic leagues and other organizations concerned with social welfare

    6. §501(c)(4) A civic league can be exempt if: Not organized for profit Operated exclusively for promotion of social welfare Must engage primarily in activities to promote the common good and general welfare of the people in the community NOT: political campaigning NOT: for recreation of members NOT: carrying on business like a for-profit

    7. §501(c)(4) LCI received 501(c)(4) status in December, 1940 All Clubs under LCI umbrella also have same status

    8. Deductibility and §501(c)(4) Donations NOT tax deductable Required to notify contributors Express, conspicuous statement Required on all written, telephone, radio, of TV solicitation Exception Gross receipts under $100,000

    9. §501(c)(3) Created and operated exclusively for exempt purposes Upon dissolution, all assets go to another 501(c)(3) or the government

    10. §501(c)(3) Exempt Purpose Religious Educational Scientific Testing for Public Safety Literary Athletic Prevention of Cruelty to Children or Animals Charitable

    11. §501(c)(3) What is Charitable? Relief of the poor, distressed and underprivileged Advancement of religion, education or science Building / maintaining public property Lessening the burdens of government Promotion of the social welfare through prevention of crime and discrimination or advancing the above

    12. §501(c)(3) Donations are tax deductable Possible special mailing rates Right to issue tax exempt bonds Possible right to avoid paying sales tax No part of the net income can inure to the benefit of any member

    13. §501(c)(3) v. §501(c)(4) §501(c)(3) §501(c)(4) Donations deductable Rigid filing requirements File very detailed 990 Close scrutiny by IRS Possible postage discount Sales tax advantages Specific project or purpose Donations not deductable Simpler to apply for File less detailed 990 Little IRS oversight Varied projects

    14. §501(c)(3) v. §501(c)(4) Why are Lions Clubs 501(c)(4)’s? Not one good answer LCI choose not to apply for (c)(3) status Administrative v. Activity accounts LCI (and clubs) may not have an exclusively “charitable purpose” under IRS definition Increased filing requirements with (c)(3) Much more governmental oversight

    15. Questions about 501(c)?

    16. Gambling in Wisconsin Generally ILLEGAL under Federal law State law allows certain specific types Raffles Class A and Class B Calendar Raffles Bingo Other gambling-type fundraisers

    17. Raffles Two general types of Raffles Class A (Pre-event sale) Class B (Same day sale)

    18. Class A Raffles Pre-Printed Tickets Must have required information on ticket Pre-event sales Typically two-part tickets

    20. Other Class A Rules Sales start no more that 270 days before event Face to Face sales only Stubs cannot be mailed. (USPS says nothing can be mailed) No internet sales Maximum cost of $100 per ticket

    21. Other Class B Rules Tickets must be the same form “Bucket Raffles”, once illegal, now legal again with only one type of ticket All Prizes must be awarded Same money gets same number of tickets No more than $10 per ticket

    22. How to Apply Go to www.dos.state.wi.us keyword RAFFLE Print out the application form (one for each Class, i.e. TWO applications) Mail them in with $25 each Renew annually

    25. Calendar Raffles Must have a Class A license Must get Calendar pre-approved Send sample to Department of Gaming They will respond within ten days All of the Class A rules apply

    26. Bingo Much more heavily regulated than raffles See www.doa.state.wi.us for more info

    27. Other Charitable Gaming Pull Tabs Private games are being supplied illegally or under a loophole in Wisconsin law In recent years, the department has referred 13 cases to local district attorneys for prosecution for SALE of pull tabs --The Associated Press ,November 20, 2008

    28. Pull Tabs Only Wisconsin Lottery pull tabs are legal Any other pull tabs not produced by the Wisconsin Lottery are not legal in Wisconsin

    29. Other Charitable Gaming Casino Nights Games such as Las Vegas nights where participants make a payment or donation in order to gamble with play money, and then use the play money at the end of the evening to bid on prizes . . . constitute ILLEGAL lotteries under Wisconsin law. The law does not exempt benevolent or nonprofit organizations.

    30. Other Charitable Gaming All other promotions in Wisconsin are illegal if: They involve a prize They involve giving up something ($$$) They involve chance

    31. So, the Only Legal Gaming in Wisconsin is: Class A and B Raffles (with license) Calendar Raffles (with Class A license) Bingo (with license) Certain Crane games (with license) with prizes under $5 each Pull Tabs produced by and sold on behalf of the Wisconsin Lottery

    32. Additional Resources Two informative websites: www.doa.state.wi.us www. datcp.state.wi.us This PowerPoint presentation can be downloaded at www. Lionbarry.net – look for the DG Presentations button on the left hand side

    33. Questions???

    34. Thank You

    35. Other issues not covered but still interesting

    36. Bingo Any service organization may apply for a bingo license Fee is $10.00 for each bingo occasion plus an annual license fee of $5.00 Additional occupational fee of 1%-2% of gross receipts, payable semi-annually

    37. Bingo Rules All organizations conducting bingo games must be licensed by the Wisconsin Division of Gaming Every bingo occasion held must be listed on the license Every bingo organization must maintain a separate “bingo checking account”

    38. Bingo Rules Each organization must file financial bingo occasion reports twice each year Twice a year, each licensed organization must pay an occupational tax on proceeds Every organization conducting bingo must have a Seller’s Permit and collect sales tax from the players

    39. Bingo Rules A comprehensive bookkeeping system must be utilized and all records kept for at least four years All profits from operations must be used for proper and legitimate expenditures All bingo supplies and equipment must be purchased from a licensed supplier

    40. Bingo Rules Only bingo workers who have no record of criminal activity can assist in the conduct of bingo Location where bingo held cannot be owned or operated by anyone with a criminal record, or gambling offense

    41. More 501(c)(3) information If you have specific questions, please speak with a local attorney (it’s a great way to make a contact that may turn into a member) or search for information at the LCI website at www.lionsclubs.org. LCI can steer you toward a company that will help you prepare a 501(c) (3) at a reasonable price.

    42. Does your club need to be a §501(c)(3)? No Cost* far outweighs the benefit of tax deductibility and possible sales tax benefit for most Lions Clubs *Document prep, accounting requirements, formation requirements, increased regulation

    43. Does your club need to have a §501(c)(3)? Maybe If you: Have a special, charitable, ongoing project where you: expect to collect and spend money, can separate the project from the club, and will use the benefit of tax deductibility

    44. Does your club need to have a §501(c)(3)? Specific Examples: Wisconsin Lions Eye Bank Grafton Lions Park Windsor Heights Lions Food Bank Foundations (like LCIF or WLF, but local)

    45. Individual Lions Club Foundation Donations are tax deductable to donor Must be a separate corporation Must have its own Board of Directors Must have its own checking account Must file its own 990 Must use all funds for stated purpose of foundation, i.e. funds can go from the club to the foundation, but not back again

    46. How to get §501(c)(3) determination File Articles of Incorporation with the DFI File Form SS-4 to get EIN File Form 1023 with the IRS Respond to letter from the IRS Get IRS determination letter granting status Document prep time – 30 to 40 hours Time to get determination – 9 months

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