I think it would be illegal, but I want to check.
Would it be illegal to run a charity raffle of some desirable instrument(s) and take out the list price from the proceeds before giving the money to the chosen charity or charitable cause?
I do not know specifically, but I would think not. I have been involved with organizations that have done just that. Your donation is yours and you should be able to extract the expense (purchase price) from the procedes.
Tricky one this but I would imagine that if you specified that the "Profits"from the sale would go to charity you would be covered.
I cannot see any Charity refusing monies because expenses,as such, were deducted.
Slan,
D.
Do we have a lawyer or accountant on the board?
Ethically, I can’t see any problem at all, if all you’re doing is covering reasonable expenses rather than running it for a profit.
Legally, I don’t know. I believe that organized non-profits are expected to keep books to show income and expenses (I’m a board member of our local astronomical association; we we need to do this to keep our non-profit status). But for a one-time event, it’s a lot less clear. I suspect you’d be OK as long as you have the records, but the more often you do it the better your records will likely need to be.
But remember, this is tax law - that means that it’s often completely non-intuitive. If you plan to do this regularly, you might want to chat with an accountant.
(Drat. I HATE to throw rain on your parade - it sounds like you’re doing something admirable. I just want to make sure it runs smoothly for you.)
I think that the laws on this matter vary by state.
Count me in either way!
My two cents are in line with DCrom. Legal versus illegal is usually an issue of government money. Mainly the IRS. The cost of postage, overhead, etc. are operating expenses and are expected to be taken out. A complaint being filed is the most common IRS/Government attention getter.
I would think that it would be! I believe that is why when you donate an item to a charity (non-profit), you are able to claim the full prchase amount you paid for the item on your taxes. Otherwise, you could donate the item, get the money you paid for it back in full, and also claim it on your taxes. I think the IRS would frown on something like that.
Maybe I should ask my father-in-law about his “problems” with the IRS, and see what he has to say! I think he did something like that a long time ago! Ha!
If I were one who followed the line of relativism I’d say it’s legal if you believe it’s legal.
I somehow don’t think the IRS agrees though.
You’re absolutely right, Walden. It would be best to check NY law regarding practices for charities, raffles, etc. to be sure you’re not in violation. As far as the tax code, I wouldn’t even venture a guess.
This isn’t going to help with the question as regards the US but some ‘charities’ in Australia have turned out to be run by businessmen. They wore pin-striped suits and drove BMWs, ostensibly because the ‘big end of town’ expects that and distrusts giving money to anyone who doesn’t look the part. It often turned out that ‘expenses’ were taking up the bulk of money donated and the object of charity was getting only a very small percentage. Since the law gives charities certain tax exemptions, I think regulations have been tightened to exclude professional fund raisers like this from operating. I regard this sort of thing as a scam as do most people.
What you propose, Jessie, sounds fine to me so long as you you are up front about it. I mention this stuff because it goes a long way towards explaining why laws might be quite tight in certain places.
Think about it. Jessie is not the charity receiving the funds. She is the one that is generating the funds for the donation. They cannot make her decide how much to donate, that is totally a personal matter.
I belong to a church. I generate the funds that I donate to my church from my work. They cannot make me donate my whole paycheck just because that is where my donation money comes from. Even if the money I donated came from eBay auctions, it is totally up to me to decide how much of that money to donate to them. I can even choose to NOT donate to them even though I told them I would.
As long as you do not claim the whole amount and only the actual portion donated there should not be any question at all.
I can even choose to NOT donate to them even though I told them I would.
I think you would run into trouble if you told people bidding on an auction or buying tickets to a raffle that the proceeds were going to charity and then don’t give the money. The charity might not have reasons to complain, but the people duped into bidding or buying tickets would.
As long as you do not claim the whole amount and only the actual portion donated there should not be any question at all.
This is how I picture the situation. Jessie has property that she bought previously. For whatever reason, she wants to get rid of the property, but she wants to be reimbursed the list price. She wants to know the legality of having a raffle for the property, recouping for herself the cost of the item from the proceeds and donating any excess to a charity. In this case, she wouldn’t get to claim ANYTHING for tax purposes as she was reimbursed 100% replacement value for her goods and all other monies came from other sources. In effect, she hasn’t donated anything except time if enough tickets are sold to reach 100% replacement value.
I don’t know about the legalities of this, but it seems rather unethical, as if you want to sell property more than raise money for a cause, but you want to play on the charitability of others to buy more tickets and increase the odds of reaching 100% replacement value for your merchandise.
I’m sure such a raffle could be worded so that it was perfectly legal, but it still seems pretty icky to me.
I agree with “ArtsOhio”. I think you would be fine as long as you give the said amount to the charity. If you advertise that 20% of the proceeds are going to Easter Seals, then you had better send Easter Seals 20%. Other than that and checking into your local laws governing such a raffle, I don’t see any problems. Just remember that if you not a “non-profit”, you will have to pay taxes on all proceeds received.
Your question was on legality. Whether it is legal to run such a raffle in NY is one thing but taxes are another. You are required to pay taxes on net income. That means if you pull out the price of the whistle you are not violating tax law. But I am not a tax lawyer. I would however make sure that everybody knew ahead of time what you are doing. I am all for it.
Ron
My husband, who has a bit of a business law background, says that in some states a raffle by an individual or for-profit organization would be an unregulated lottery (like running numbers) and illegal.
As Executive Director for a non-profit organization (in California), I have to agree with the above. There are special conditions that must be met before even a non-profit can hold a raffle. Also, raising of funds for charitable purposes by individuals or businesses that are in themselves not charities, have limitations as well. Generally, donations are deductible at their actual cost to the donor, not market value, except in certain instances of stocks or real estate that may have gained value while held.
Kevin Krell
When I did the Jerry raffle, I donated instruments, money and quite a bit of time. I didn’t even mention it to the tax people. If they come after me for that, I do have several hundred people who would vouch for me, so that’s something, anyway.