More and more, higher education institutions are looking to “raffles” for opportunities to raise funds.  It should be noted that these events may require state registration, more Form 990 reporting, and additional tax compliance with prize reporting.   Also, they could generate unrelated business income taxes.


Marathon Bible College (MBC) is a private college exempt under Internal Revenue Code section 501(c)(3) and section 170(b)(1)(A)(ii).  They are required to file Form 990 annually.

MBC’s Controller calls us with their Director of Development on the line.  She indicates that MBC is planning to conduct a raffle in March of 2017 and asks us what issues they should be aware of as they plan this event.

We answer that there are myriad issues involved.  And, after our phone discussion, we sent them a listing of issues.  (See below.)


A raffle may look like a unique and exciting way to raise funds. But before engaging in a raffle, an organization should consider the following:

  1. The purchase of raffle tickets does not result in a tax-deductible contribution. This is discussed on page 7 of IRS Publication 526, Charitable Contributions.
  2. When a raffle prize is greater than $600 and more than 300 times the amount of the wager, the organization must report the identity of the winner to the IRS and issue the winner a Form W-2G, Certain Gambling Winnings. See page 22 of IRS Publication 3079, Tax-Exempt Organizations and Gaming.
  3. If the value of the prize is greater than $5,000, the raffle sponsor must withhold 28% of the value of the prize less the cost of the raffle ticket(s) purchased. If the prize is non-cash, the organization must either collect the withholding amount from the winner, or pay an amount equal to 33.33% of the value of the non-cash prize itself. When the sponsor pays the tax withholding amount, the amount of the tax withholding paid is added to the value of the prize on Form W-2G. When withholding is required, the winner must sign Form W-2G attesting to the fact that no other person is entitled to any portion of the payment and that the winnings are subject to regular gambling withholding.
  4. Raffles will generally require institutions who are required to file Form 990 to complete Schedule G (Form 990), Part III, “Gaming”. Before holding a “raffle” it would be advisable to review the Instructions to Schedule G and also the Form 990 glossary with respect to the terms, “gaming” and “volunteers”.
  5. Income from raffle tickets is unrelated business taxable income if raffles are an activity the organization regularly carries on (perhaps more than twice per year or for more than two weeks in duration) or is not substantially staffed by volunteers.
  6. Also, there can be state and local implications to “raffles” that vary widely depending upon the jurisdiction in which your institution is located and/or where the raffle might be held. Make sure you research any potential regulatory or registration requirements.
  7. Finally, there is the potential public relations angle – which each organization should assess for themselves.


Bill buys a $10 raffle ticket for the chance to win a $6,000 cash prize. Bill’s ticket is drawn. Because Bill’s winnings net of the cost of the raffle ticket ($5,990) are greater than $600 and more than 300 times the amount of the wager (the cost of the raffle ticket), the organization sponsoring the raffle must report Bill’s winnings to the IRS, issue Bill a Form W-2G, and withhold $1,677 (28% of $5,990). Additionally, Bill must sign the Form W-2G.

Bottom Line

**Fundraising issues and numerous other tax areas of interest will be presented at the first annual Tax Forum for Biblical Higher Education on Thursday, February 9, 2017 in Orlando, Florida. Three hours of CPE will be offered.  Attendance may be in-person or online.  For more specific information, click here.

Raffles can provide much-needed funding and raise awareness for your school.  However, there is a “tread lightly” admonition that should precede and accompany “raffle planning and execution”.  It would be good to run this by your skilled, knowledgeable, and experienced tax advisor.  He or she will be able to help your school navigate the intricacies of the reporting requirements.

Specific questions? Email Dave Moja.

The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.