Excellent info, Isaac!
I guess, though, it is always prudent to review state laws for their definitions. This is particularly important in those states where their laws require registration for any game of chance and restrict nonprofits to a limited number of raffles.
I just looked at the NC statues and it is ambiguous at best whether a raffle is only a raffle if a monetary award is given - although there are limits to the value amount.
A case could be made that if an organization has a naming policy and that policy states minimum naming amounts, a winner of a naming raffle is receiving something of value even if isn't tangible.
John
John H. Taylor
919.816.5903 (Cell/Text)
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Original Message:
Sent: 3/8/2024 12:12:00 PM
From: Isaac Shalev
Subject: RE: Raffle for Naming Rights
John, have a look here, for example:
https://www.irs.gov/pub/irs-tege/eotopicm90.pdf
The (very) short version is that the IRS doesn't itself explicitly define a game of chance. Rather, it follows state laws and common law for gaming/gambling/lottery definitions. While language varies, the typical state definition of a game of chance includes the element of value, eg Ohio's: "a game in which a player gives anything of value in the hope of gain, the outcome of which is determined largely by chance" , all of which follow the common-law definition of the three elements of games of chance, which are chance as a major factor, consideration (ticket purchase or contest submission), and a prize of tangible value.
Put another way, if nothing of value is being offered to donors, the only intent that they could have for giving money is a charitable intent.
Thank you,
Isaac Shalev
Data Strategy Expert
Sage70, Inc.
(917) 859-0151
isaac@sage70.com
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Original Message:
Sent: 3/8/2024 10:03:00 AM
From: John Taylor
Subject: RE: Raffle for Naming Rights
I guess I have a question regarding an earlier comment.
I've read several IRS and tax authority comments regarding games of chance. Nowhere do I find a reference to those games having to result in winning cash or a tangible benefit. All the commentary I can find state that the IRS refers to raffles as a form of gambling and not a charitable donation. You are paying to play - regardless of what you might win.
Is there something somewhere that says raffles for intangible benefits are not games of chance?
John
John H. Taylor, PrincipalJohn H. Taylor Consulting, LLC
2604 Sevier Street
Durham, NC 27705
919.816.5903 (cell/text)
Serving the Advancement Community Since 1987
Original Message:
Sent: 3/8/2024 9:48:00 AM
From: Isaac Shalev
Subject: RE: Raffle for Naming Rights
Oof, Sarah, a cautionary tale! I'm sure we all remember Boaty McBoatface, too. A raffle doesn't bring up quite the same dynamics as a naming contest, since a single winner picks the name, typically after winning. That naming choice must be subjected to your institution's normal rules on naming. A contest is much more fraught, and in a college environment is practically an invitation for shenanigans.
Thank you,
Isaac Shalev
Data Strategy Expert
Sage70, Inc.
(917) 859-0151
isaac@sage70.com
Schedule a 30-minute consultation now:
Original Message:
Sent: 3/7/2024 5:32:00 PM
From: Sarah Thomas
Subject: RE: Raffle for Naming Rights
Hello,
Regarding the discussion about the potential raffle organized to name a cottage on campus, I strongly advise against it. The implications of such an action are concerning, particularly since we cannot predict the outcome of who or what the cottage might be named after. This could potentially lead to ethical dilemmas or result in an unsuitable name being chosen.
We once held a contest to name an NC State building located off-campus. Unfortunately, this initiative proved to be highly problematic. Despite the donor's request for a contest to determine the building's name, the results were far from satisfactory. Many of the suggested names were inappropriate, while others lacked coherence. When the Dean selected one of the options, I had to intervene and reject it despite my uncertainty about my authority to do so. Notably, the chosen acronym spelled out "RAW Creamery." Eventually, the building was named something entirely different, disregarding the options presented in the contest.
Given our past experience, it is evident that leaving the naming process to chance or public opinion can lead to undesirable outcomes. Therefore, I urge caution and deliberate consideration before proceeding with any similar endeavors in the future.
Original Message:
Sent: 3/7/2024 5:15:00 PM
From: Isaac Shalev
Subject: RE: Raffle for Naming Rights
While Pub 526 prohibits deductions for games of chance, a raffle for naming rights may not be a game of chance because, by definition, a game of chance needs to be for money or other valuable consideration. Naming rights do not appear to fall into that category. If you run a lottery for, e.g., the right to throw a pie in the dean's face, those tickets would be tax-deductible because that lottery would not be a game of chance.
Naming right raffles are not uncommon fundraising tools for animal rescue and amateur sports orgs, and they are considered tax-deductible. I would advise asking counsel.
Original Message:
Sent: 3/7/2024 4:47:00 PM
From: John Taylor
Subject: RE: Raffle for Naming Rights
No payment for a game of chance is a tax-deductible gift. See IRS Publication 526.
John
John H. Taylor, PrincipalJohn H. Taylor Consulting, LLC
2604 Sevier Street
Durham, NC 27705
919.816.5903 (cell/text)
Serving the Advancement Community Since 1987
Original Message:
Sent: 3/7/2024 4:45:00 PM
From: Kim Salisbury
Subject: Raffle for Naming Rights
Hello,
Our Alumni Office is talking about the possibility of holding a raffle where the prize would be the right to name a cottage (student housing) on campus. If they were to do this, would the purchase of a raffle ticket qualify as a tax-deductible gift? I know it would not if the prize had monetary value, but if the only prize is naming rights, are the entries then considered a gift?
Anything else we should watch out for with this idea?
Thanks,
Kim
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Kim Salisbury
Hope College
Philanthropy Services
salisbury@hope.edu
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