These days, post-COVID, many colleges are looking toward new fundraising ventures in order to raise
much-needed dollars. One opportunity may be in the form of “raffles.” Institutions should diligently
research and ensure that they are staying within the law when it comes to “gaming” activities.
The glossary of the Form 990 instructions (2021) 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.

Recently, the IRS published a new “Issue Snapshot” entitled, “Gaming and Unrelated Business Taxable
“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.”

Here are some other gaming resources:
– IRS Publication 3079, “Tax-Exempt Organizations and Gaming” at:
- Schedule G (Form 990) – Instructions, at:
- 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

Excerpt from IRS Exempt Organization Issue Snapshot, “Gaming and Unrelated Business Taxable

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. 

There are really two issues with gaming activities. 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.
Take care to gather data and obtain great counsel when it comes to gaming activities.

Written by
David C. Moja, CPA
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.