Tax Tips Logo ImageISSUE:

Lately, there has been a lot of conversation about “gaming.”  If a college holds a raffle, does that need to be reported on Schedule G (Form 990), Part III?  And might the raffle generate unrelated business income?  Back in 2018, the IRS gave us an “Issue Snapshot” on Gaming.  The IRS begins this piece with, “The conduct of gaming by tax-exempt organizations may result in unrelated business taxable income.”


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

The DCC Accounting Team was meeting with us via Zoom to talk about our upcoming, six-month interim audit work for June 30, 2022.  In the conversation, DCC’s CFO wondered about their planned raffle that is scheduled to take place in April 2022.

“There are really two issues with gaming activities,” we said.  “First, is it gaming for Form 990 purposes.  Second, might the activity be considered an unrelated business activity.  As to gaming, we should look at the definition in the glossary of the Form 990 instructions.  With the UBIT issue, the IRS actually released an ‘Issue Snapshot’ on gaming a few years ago.  Also, remember that ‘gaming’ activities will generally need to be reported at Form 990, Part VIII, Line 9 and on Schedule G (Form 990), Part III.  And remember, the only ‘gaming’ activity that is specifically excluded from UBI is bingo.”

“Sounds great.  We will look at those resources and let you know if we have any questions.”

“Merry Christmas!”

The glossary of the 990 instructions (2020) defines gaming as:

Includes (but isn’t limited to): bingo, pull tabs/instant bingo (including satellite and progressive or event bingo), Texas Hold-Em Poker, 21, and other card games involving betting, raffles, scratch-offs, charitable gaming tickets, break-opens, hard cards, banded tickets, jar tickets, pickle cards, Lucky Seven cards, Nevada Club tickets, casino nights/Las Vegas nights (other than events not regularly carried on in which participants can play casino-style games but the only prizes or auction items provided to participants are noncash items that were donated to the organization, which events are fundraising events), and coin-operated gambling devices. Coin-operated gambling devices include slot machines, electronic video slot or line games, video poker, video blackjack, video keno, video bingo, video pull tab games, etc. See Pub. 3079, Tax-Exempt Organizations and Gaming.

“Issue Snapshots” – according to the IRS – provide an overview of an issue and are a means for collaborating and sharing knowledge among IRS employees. Issue Snapshots may not contain a comprehensive discussion of all pertinent issues, law or the IRS’s interpretation of current law.”  In many ways, they are “CliffsNotes” for IRS auditors who are examining a Not-for-Profit’s activities.

The IRS webpage – “Exempt Organization Gaming and Unrelated Business Taxable Income” may be found at:

Exempt Organization Gaming and Unrelated Business Taxable Income | Internal Revenue Service (


RULES:                                                                        .

From IRS Exempt Organization Issue Snapshot, “Gaming and Unrelated Business Taxable Income”:

Gaming is a recreational activity and, if conducted for a profit, a trade or business. Gaming includes bingo, beano, raffles, lotteries, pull-tabs, scratch-offs, pari-mutuel betting, Calcutta wagering, pickle jars, punchboards, tip boards, tip jars, certain video games, and other games of chance.

Gaming is also a common type of fundraising engaged in by tax-exempt organizations. In addition, many types of organizations conduct gaming in furtherance of social or recreational purposes. Gaming is normally regulated by state and local law in the jurisdiction in which the activity occurs.

Most gaming, if regularly carried on for profit, is an unrelated trade or business activity, which may produce unrelated business taxable income (UBTI).  As with other unrelated trade or business activities, the fact that an organization uses the proceeds from its gaming to pay for its exempt purpose programs does not make the gaming activity related to its exempt purposes.  Therefore, gaming income received by exempt organizations is treated as UBTI, unless a specific exception applies.

Audit Tips:

  • Determine whether gaming is an unrelated trade or business. Factors to consider:
  • The frequency of the activity,
  • The length of time it has continually been conducted,
  • How the organization promotes the activity, and
  • How nonexempt businesses conduct similar activities.
  • Determine the organization’s meaning of “membership.”
  • Distinguish guest income from income from members of the general public
  • Determine whether the organization’s gaming activities are regulated by state or local law.
  • All workers involved in the operation of the gaming activities must be taken into account in determining if substantially all of the work is performed without compensation.
  • Bingo dauber sales and food/beverage sales don’t meet the bingo exclusion and are unrelated business income unless one of the IRC Section513(a) exceptions applies or bingo is conducted with members only (as applicable).
  • Determine if gaming activity is primary activity and/or if receipts are substantial which may affect foundation classification (for IRC Section 501(c)(3) organizations) and/or exemption status.



  • The IRS has released an “Issue Snapshot” in 2021 regarding Gaming and UBIT.
  • We are hearing of the IRS performing an increased number of audits regarding gaming activities and UBIT.
  • Remember also that there may be state filing requirements for gaming activities.
  • For more on Gaming, check out IRS Publication 3079, “Tax-Exempt Organizations and Gaming.”


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