Massachusetts raffle rules for booster clubs and PTOs

Who may hold a raffle

Raffles are an exception to the state's gaming laws, set out in Massachusetts General Laws c.271 §7A and explained in the Attorney General's “Guidance on Raffles.” The statute lists the kinds of organizations that qualify, including educational or charitable organizations and clubs operated for nonprofit purposes where no net earnings benefit any member.

• The organization must have been organized and actively functioning as a nonprofit in Massachusetts for at least two years before applying
• Only qualified members of the sponsoring organization may promote and run the raffle, and none of them may be paid in any form
• All proceeds must be used for the purposes stated in the application, limited to educational, charitable, religious, fraternal or civic purposes or veterans' benefits
• A public charity must be registered with the AG, in compliance with its reporting, and hold a Certificate of Solicitation
• A for-profit business cannot hold a raffle for itself or for a nonprofit, and an individual cannot either

A brand-new PTO cannot hold a raffle in its first two years, even if it is working with a school. Plan other fundraisers for that period.

Getting the permit

The permit comes from the clerk of the city or town where the raffle will be drawn. The application includes the organization's name and address, the evidence it relies on to qualify, the names of three officers or members responsible for the raffle, and how the net proceeds will be used.

1. 1.Submit the application and fee to the town or city clerk.
2. 2.The clerk checks it and forwards it to the chief of police.
3. 3.If the chief endorses it, it goes back to the clerk, who issues the permit.
4. 4.If the application is not acted on within 30 days, or is refused, the statute provides for review in the district court.
5. 5.The permit is valid for one year from the date it is issued. There is no limit on the number of raffles under a permit; bazaars are limited to three a calendar year, one a day, five hours each.

Permit fees, and an Easton example

The statute sets a $10 application fee unless a town sets its own by bylaw (or a city by ordinance), and says the fee can never be more than $50. The statute also states a renewal fee of $10.

Local practice varies. The Town of Easton's clerk page lists $25 for a new permit and $20 for a renewal, and asks for the prior year's annual raffle report with any renewal. The new-permit fee is within the statute's $50 ceiling; the statute's own renewal figure is $10. Pay what your clerk asks, and if the numbers matter to your budget, ask the clerk which bylaw sets them.

Extra rules above a $10 ticket or $10,000 prize

If any ticket costs more than $10 or any prize is worth more than $10,000, the AG's guidance lists additional requirements:

• Only members of at least 3 months who are in good standing may help run the raffle
• Tickets, or a written notice given before sale, must disclose the drawing date, prize description, appraised value (with an independent appraisal if the prize was bought), inspection date, how much of the price goes to charity, minimum or maximum tickets, that the prize is ordinary income to the IRS, that no part of the ticket is a charitable contribution, and that mailing tickets violates federal law
• Purchasers must be told of any change in terms and allowed to rescind
• If the prize is not awarded, all money must be returned within 30 days
• No member or employee of the organization, or their immediate family, may buy a ticket or win
• No tickets may be given away
• A record keeper who has been a member for at least two years keeps the seller list, prize documents, permits, purchaser names and addresses, and all ticket and financial records

50/50 raffles, online sales and silent auctions

Massachusetts has no law allowing raffle ticket sales over the internet, and the AG says both the seller and the buyer must sign the ticket. Organizations that want to run an online raffle are told to consult an attorney first.

On 50/50 raffles the AG's guidance is cautious: if the prize is cash, as in a 50/50 where the winner gets half the proceeds, or if any part of the prize comes from raffle proceeds, the raffle “may run afoul of the prohibition against pooling.” Talk to an attorney before planning one. By contrast, the AG's FAQ says a silent auction needs no raffle permit, because it is not considered gaming activity.

After the drawing

Two filings follow every permit year, plus a federal check on prizes. Within 10 days after each raffle, the club files a return with the State Lottery Commission and pays 5% of the gross proceeds. Within 30 days after the permit expires, it files two copies of a financial report with the clerk. Large prizes may need an IRS Form W-2G. Each of these has its own guide in this hub.

Penalties

Violating the statute, or submitting false information on an application or report, can bring a fine of up to $1,000, up to a year in the house of correction, or both. The permit is revoked for any violation, and no new permit can be issued to that organization for three years. For a club that depends on its annual raffle, the three-year bar is the penalty that hurts.