Conduct Charitable Gaming Lawfully

Charitable gaming is one of the most common and successful methods of producing income for many tax-exempt organizations. Gaming activities include:

• Bingo,
• Beano,
• Raffles,
• Lotteries,
• Pull-tabs,
• Scratch-offs,
• Pari-mutuel betting,
• Calcutta wagering,
• Pickle jars,
• Punchboards,
• Tip boards,
• Tip jars, and
• Certain video games.

For almost all tax-exempt organizations, including 501(c)(3)s, gaming activities do not further an exempt purpose. They will generate UBI if they meet the other parts of the UBI test and no exceptions or exclusions apply (such as the exception for traditional bingo).

One exception is in North Dakota, where income from lawful gaming is excluded from UBI tax.

Lawful gaming ordinarily requires a gaming license from the state that conducts it.  

Your 501(c)(3) can lawfully conduct gaming if it:

• Does not become a substantial part of the organization’s activities, and
• Generates funds for the organization’s exempt purposes.