Navigating Georgia Raffle Laws: The Definitive Guide

Raffle Laws in Georgia: An Overview

A Raffle is a commercial activity in which tickets are sold to individuals participating in an event with the aim of winning prizes or a cash payout. Laws exist to regulate the manufacture of tickets, rules regarding advertising, and ticket pricing. In Georgia, laws also govern which organizations can legally conduct raffles.
The Official Code of Georgia Annotated (O.C.G.A.) §43-17-1 through §43-17-5 details the state’s Raffle Laws, but the implantation and oversight are delegated to the Georgia Bureau of Investigation (GBI), Crime Intelligence Unit . Raffles are limited to only those non-profit organizations including charitable organizations, churches, fraternal and civic organizations, those connected either socially or professionally, or groups united only for a common cause such as a college or charity association. Since raffles are considered a form of gambling, the organization must register with the Crime Intelligence Unit and adhere to all rules and regulations.

Legal Considerations for Conducting a Raffle in Georgia

In Georgia, organizations that wish to host a raffle must comply with specific legal requirements to ensure that their raffle is conducted in a lawful manner. At present, only certain nonprofit organizations are permitted to conduct raffles in Georgia for promoting the welfare of the general public or a community through cultural, charitable, educational, or community services.
First and foremost, these organizations, which include educational, religious, athletic, charitable, and civic groups, must be organized in compliance with their respective organizational codes. For example, those seeking charitable and educational purposes must be organized in compliance with their respective code sections. On top of being in compliance with their respective code sections, the organizations must also obtain a license from their county or municipal governments before they are permitted to conduct a raffle. The license must authorize the organization to conduct the raffle.
Further, the Fair Business Practices Act also applies to raffle ticket sales, but it generally does not apply to the distribution of free tickets. As such, the organization must be cautious when distributing free tickets, as it does not need to comply with the mandatory disclosures at the back of the ticket, and cannot evade compliance with its own internal rules and regulations. Raffle tickets may be sold at a certain price for a designated period of time, and there is no upper limit on the price or period of time for the sale of raffle tickets. Any individual who enters into a raffle must be 18 years old or older at the time of entry. Further, all individuals receiving a raffle prize valued at $25 or more must obtain a W-2 form from the organization and pay the appropriate taxes.

Organizational Eligibility for Prior Raffle Licensure

Eligible Organizations for Raffles in Georgia
As previously mentioned, only certain types of organizations may conduct raffles in Georgia. This section will describe what those types are and some key notes about each. To be eligible to conduct a raffle on this list, an organization must be active with the Secretary of State’s Office. If you organization is not familiar with the Secretary of State’s Office they are essentially the gatekeepers to conduct business in Georgia. You will likely already have some presence with them if you conduct business such as LLC’s, Corporations, etc. A "Non-profit corporation" means a corporation other than a "for profit corporation" or a "foreign corporation" that is organized pursuant to the provisions of Chapter 3 of Title 14 and whose corporate existence has not been terminated or suspended under the provisions of Chapter 3 of Title 14. A "Domestic nonprofit corporation" means a nonprofit corporation whose articles of incorporation authorized under and whose corporate existence has not been terminated or suspended under the provisions of Chapter 3 of Title 14 does not state that the corporation is a "corporation for profit" and whose principal office is in this state. A "Foreign nonprofit corporation" means a nonprofit corporation that is organized under the laws of any jurisdiction other than this state and is not a "for profit corporation" or a "domestic nonprofit corporation." This type of eligible group is limited to political subdivisions of this state for the conduct of raffles by public school systems, state colleges and universities, and local boards of education. "Eligible Religious Organizations" are: religious organizations that have one of the following federal tax designations: The only catch with this type is that the organization must be in good standing with the IRS. Each organization should be able to verify this status. "Volunteer fire departments and first responders" refers to: nonprofit corporations, volunteer firefighter companies, volunteer firefighting organizations, volunteer rescue organizations, volunteer emergency medical services organizations, and nonprofit ambulance services. Keep in mind, collecting raffle fees, ticket purchases, and other non-charitable activities would not qualify for the charitable solicitation exception. "Public Benefit Corporations" means a corporation, limited liability company, or limited liability partnership formed for schools, parks, or recreation. "Chambers of commerce" means domestic or foreign chambers of commerce. "Civic organizations" means veterans clubs, civic awareness clubs, and Civil War roundtable clubs.

Raffle Prize Guidelines and Restrictions

As explained above, there must be a gambling "prize" that is awarded to the "winner" of the Raffle in order for the law to consider this a legal Raffle. Technically, there is no limit on the value of the prize that can be offered. However, because the law also requires that the value of the "prize" for each ticket "participant or winner" be the same, single prize of more or less equal value must be awarded to all. Moreover, because the law requires that the "prize" be essentially "equal" in value to the "tickets" sold, organizations should be careful and consider that additional items of value must not exceed the stated limit of $5 per ticket.
A Non-Profit Organization may not award as a "prize" either: participation in a legal gambling game at a facility that has a legal right to conduct such games, or participation in a raffle or drawing conducted under the section of the Code that addresses Raffles.

Tax Considerations for Raffle Winners in Georgia

In the eyes of the Internal Revenue Service, all gambling is a form of legal recreation. As a result, both the raffle winner and the organizers have a responsibility to report winnings of certain amounts on their tax returns. The IRS does not differentiate between wagering-based contests on an entry fee or ticket purchase basis and games with cash or material prizes (e.g., golf tournaments). Taxes are involved regardless of the method used to collect funds; thus, planners, sponsors, organizers, and businesses granting prizes or donating items should understand the potential scope of their tax liabilities.
The planner, sponsor, business, or organizer who sells tickets or other things as part of the chance program assumes the usual employment tax responsibility of the employer for the event. The employer is responsible for withholding federal income tax, social security tax, and Medicare tax from the payments of wages, bonuses, and commissions. However, the usual exception excludes from the responsibility of withholding and paying over these amounts any wages within the limits of the de minimis exception . Since the value of noncash prizes is minimal, usually no withholding will be required. However, the IRS has made clear that some situations, such as those where the income is substantial, may trigger withholding requirements on an employer or the payer of the prize (see IRS publication "Miscellaneous Deduction Limitations," IRS Publication 526, page 4 and "Gambling Wagers," IRS Publication 525, page 26.)
A winning participant must report his or her winning as income on the income tax return. Cash, prizes, and property such as cars, houses, stock, and items bought or outside of Georgia that have to be recorded and registered are taxed on their fair market value. The fair market value of the property is the price you would pay if the property were offered for sale (See IRS Publication 525, page 11.) Electronic prizes that have monetary value, such as the value of a gift card or online gift card, do not have a fair market value (e.g., dollars credited to an online account are not treated as a cash prize or monetary prize). This is because the winner cannot surrender these balances for cash.

Penalties for Raffle Non-Compliance in Georgia

Penalties for Non-Compliance have little bite under Georgia law. A violation of the Georgia Raffle Law or a local ordinance or regulation similar to that law is not a crime. Instead, the county attorney or the city attorney may bring an action for injunctive relief or injunctive relief against a person violating a local ordinance or regulation similar to the Georgia Raffle Law. Alternatively, if the violation occurs in the context of a tax-exempt organization, the Department of Revenue may revoke the organization’s designation as a non-profit organization.
Organizations failing to meet the qualifications for a public charity described above and conducting a raffle may be subject to a civil penalty up to $100 per raffle ticket sold or offered for sale.

Changes and Anticipated Future Raffle Legislation in Georgia

Recent legislative activity has sought to clarify existing language and create new laws applicable to nonprofit raffles in Georgia. In 2017, the Georgia Legislature amended the Georgia Nonprofit Tax-Exempt Organizations Act to address concerns related to certain charitable gaming activities. Under the 2017 amendments, certain religious and nonprofit organizations are now permitted to conduct an annual fundraiser through a single raffle that could be based on a drawing from a hat or a drawing based on a lottery-type game, in addition to traditional raffles involving tickets purchased by individuals. These new provisions, however, introduce additional record keeping and accounting requirements for qualifying nonprofits and religious organizations. For example, poker night fundraisers must maintain a ledger evidencing the date and time of each such event; the name of each participant; the card, table, tournament, or rake (percentage of pot or house take) fee charged; and the number of poker tables.
Also in 2017, a new law was enacted that exempts certain charitable organizations that are registered with the Internal Revenue Service as 501(c)(3) organizations with non-pledged and non-restricted assets under $50,000 from the requirement to register with the Secretary of State’s office. Such exemption will sunset on July 1, 2027 unless renewed.
As technology continues to advance, it is likely that playing numbers on a smartphone (mobile gaming) will be reintroduced into the legislature in a form more acceptable to Georgia lawmakers. In 2012, a bill allowing mobile games was introduced but met with strong opposition from some legislators based upon a perceived concern that mobile gaming would open the door for online gambling to take root in Georgia through the sale of lottery tickets on the Internet. Whether the 2012 experience will cause lawmakers to avoid mobile gaming initiatives for the foreseeable future is hard to predict. Any future effort will need to overcome lawmakers’ concerns that mobile gaming will become the future of online gambling in Georgia.
Whether you own a nonprofit organization or simply enjoy attending nonprofit gaming fundraisers we will be sure to provide continue to provide you with future updates on Georgia’s nonprofit gaming laws.

Georgia Raffle Best Practices

Here are some best practices when conducting a legal raffle in Georgia:

1. Partner with a responsible charity.

Much like any other state, Georgia law requires a raffle to benefit a charitable organization. Not only is this essential to be in compliance with the law, but by associating your organization with a cause and host which has a proven reputation for accountability, you will likely encourage both ticket purchases and corporate sponsorship. Instead of an organization soliciting a charity for association with your raffle, a charity may solicit you for association with theirs. And there is no state limitation as to the amount of revenue a charitable organization may raise through raffles. However, the charitable organization is required to include in its financial records all funds obtained through a raffle. As such, if the charitable organization is a national or regional organization, the charity should be registered in Georgia with the Secretary of State’s office to ensure that the ticket buyers know that the funds are going to the organization and the notification is being done legally.

2. Understand the rules regarding prizes.

In addition to the tickets not being sold for cash and all proceeds going to the charitable organization, the value and number of prizes a person may win through the purchase of one ticket also must conform to a particular limitation. Unless stated otherwise in the notice of the raffle, the winner of a raffle may not win more than three prizes. These prizes cannot have more than an aggregate value of $100,000.00. This does not mean your organization is prohibited from giving gifts with the purchase of more than one raffle ticket, but each individual ticket must have a value of at least $5.00 to qualify under the law.

3. Consider an online raffle ticket sales program.

Although this is still a developing area of law, the new trend for buying raffle tickets for prizes is site-based. Even if you are unsure whether your specific raffle would be legal under the statutes, online raffles are becoming a popular option for those looking to add to or replace traditional fundraising methods. ShoulderTapOnline.com is one option for a site-based raffle . Three types of calendars are available from ShoulderTapOnline.com: the 4 digit calendar priced at $20, the 5 digit calendar priced at $25, and the 6 digit calendar priced at $30. An organization elects to sell one kind of calendar and then implements the number assigned to their business name as specified by the non-profit group. Additionally, ShoulderTapOnline.com has the option to create a calendar for a specific organization that they already work with. Raffle tickets are sold online and people can view who has won what prizes and when. One of the most popular approach to auction fundraising, they call it "The 50/50 Split." The organization keep 50% of the proceeds for themselves while the other 50% is awarded to the winner. The prize can be as little as $400 and as high as $1400. The winning tickets are not drawn until after your event and winners are announced on your organization’s flyer and emailed to everyone who sold tickets.

4. Save those records!

Each business conducting a raffle in Georgia is required to maintain financial records. These records must include the date, amount, and name of the person from whom the tickets were purchased. If your organization does not have a method in place to track ticket sales and the names of those ticket purchasers, it is likely that a significant number of potential ticket buyers will not buy tickets because they will not receive a tax donation letter for their contribution. Organizations should also know that letters sent out to ticket purchasers are audited by the IRS, and, therefore, the record keeping of the raffle tickets plays a pivotal role in the financial data logged into the IRS’ computers.

5. Involvement can be the hardest part.

Most people think of tickets being sold at the local grocery store for a tax donation and a chance at winning the big prize without investing much time in the process. If you are attempting to distribute and collect tickets manually, you will miss a lot of the sales opportunities as some potential ticket purchasers will simply decide it isn’t worth it to track you down for a $20.00 ticket. But if you use an online raffle sales system, you will be amazed how many additional sales you can generate.