If you are considering holding a raffle or drawing for your fundraiser or event this year, we want to inform you of important compliance requirements under CA state law.

What is the difference between a drawing and a raffle?

Drawings

You may hold an opportunity drawing (and not have to file with the SRJC Foundation or State) if all of the following are true:

1. It involves a general and indiscriminate distributing of the tickets.
2. The tickets given away have the same winning opportunities as the tickets for which a donation is given.
3. It does not require any of the participants to pay for a chance to win (i.e. purchase a ticket or purchase something to be entered to win) and that fact is clearly advertised.

Raffles

If participants are required to purchase a ticket in order to have a chance to win a prize, the drawing is subject to the provisions of Penal Code section 320.5 and related regulations as a raffle.

According to CA law, all raffles must be registered with State of CA at least 60 days before holding the raffle. The SRJC Foundation files an annual registration statement which will cover all raffles for a year but must list every raffle we plan to offer for the year.. In addition to filing a registration statement, a financial report must be filed with the State for each raffle.

You must notify the Foundation by September 1 each year of any project/events that will have a raffle in the following calendar year. The Foundation is required to annually register all raffles and report proceeds to the State of California. If you do not report this information by September 1, you are not allowed to conduct a raffle at SRJC during the next calendar year.

The responsibility for an accurate and timely completion of the financial report lies with the department holding the raffle, and must be remitted to and approved by the SRJC Foundation.

The financial report requires reporting on the raffle proceeds as well as the expenses (and sources from which the expenses were paid) for conducting the raffle. The report also has a section of true/false certifications that must be answered and signed by the SRJC Foundation. These certifications are, essentially, the requirements for conducting a raffle in accordance with State law; therefore, it is the department’s responsibility to understand the law before a raffle is held.

The financial form, informative FAQ’s and other information about conducting raffles in California can be found at the State's website.

Ticket sales are not a charitable donation, as they represent the purchase of a chance to win, and are considered 100% quid pro quo. You must state on the tickets that “ticket price is not tax deductible”.

All raffles must comply with the “90/10 rule” where 90% of the proceeds must go to charity and only 10% of the proceeds may be expended winnings or raffle related expenses. This is very difficult to achieve, obviously, unless all, or nearly all, of the prizes are donated, in addition to getting the ticket sales proceeds. “50/50” raffles where you award 50% of the raffle proceeds as a prize to the winner are now are illegal in California for a charitable entity to conduct under these new rules. They don’t comply with the 90/10 rule. So, if you plan to purchase prizes or award cash from the proceeds of the raffle ticket sales, it is very likely you cannot meet the 90/10 rule.

Here are a few other guidelines if you plan to offer drawing OR raffle prizes:

• If you plan on raffling 1) items over $600 in FMV or a cash prize over $600 and  2) if the prize value is 300 times larger than the “wager” (the price for one raffle ticket), the Foundation is responsible for reporting the winner of the prize, their social security number and the value to the prize to the IRS.
• if the value of the drawing OR raffle prize is over $5,000 (net of the value of one wager), we must withhold or collect taxes from the winner before they take possession of their prize, whether the prize was cash or non-cash.
• Donations for drawings or raffles may be monetary or gifts-in-kind.
• Submit Gift-in-Kind forms to the Foundation with the fair market value as determined by the donor of all items to comply with IRS 990 requirements for auditing purposes; all forms are due at least one week before the event. 
• The fair market value of the item(s) must be displayed in print for each item or lot on all of the following that are provided at the event/activity: silent auction bid sheets, live auction program, point of purchase receipt, and formal donation acknowledgment. 
• A detailed list of all raffles items and final report of all winners must be submitted (with all associated forms and backup) to the Foundation within two weeks of the event.
• Finding out about a raffle after it was held does not excuse us from following the State and Federal regulations.

Items included in a drawing OR raffle are considered a gift and can not be purchased with public funds.

For questions, please contact the SRJC Foundation at 707-527-4348.