​​​​​​​​​​​​​​​​​​​​​​​6.2.4 Development and Fundraising​​

​​​​​​State and federal laws regulate fundraising activities by charitable organizations, especially those activities that are considered gaming, such as bingo, raffles, and casino nights. Registration or licensing is required for certain activities such as retaining outside assistance in conducting a capital campaign or running a bingo game or a casino night. Often violations of the fundraising laws are subject to criminal penalties. All locations engaging in fundraising must follow all applicable laws and regulations.  The California Attorney General's website​ provides helpful guidance, including a comprehensive Guide for Charities​.

6.2.4.1 Capital Campaigns

​A capital campaign is designed to raise significant funds for a restricted purpose such as construction, real estate acquisition, or other major projects. Prior to beginning a capital campaign, locations and any archdiocesan department shall notify and obtain approval from the moderator of the curia, the Office of Fina​ncial Services, and the regional bishop. Locations and any archdiocesan department may retain a consultant to assist in determining the feasibility of conducting a fundraising campaign. Locations and any archdiocesan department must ensure that the consultant is registered with the State of California and that the contract meets state regulations. Locations and any archdiocesan department must submit all fundraising counsel contracts to the Office of the Legal Counsel for review. Locations and any archdiocesan department, after consultation with the Office of Financial ​Services, may employ individuals to prepare a feasibility study and conduct capital campaigns as part of their staff, provided that the individual hired is directly involved in soliciting funds.

For building or construction projects, the process begins many months or years before the campaign. The process starts when locations and any archdiocesan department begin conceptual planning or feasibility studies for a proposed project or master plan. Locations and any archdiocesan department shall:

• Notify and obtain approval from the regional bishop, moderator of the curia, and the Financial​ Services Group of the wish to start any capital fundraising campaign, identifying financial goals and funding objectives, such as the budgetary costs for the project
  

• Outsource the preparation of the feasibility study to a state-registered capital campaign and fundraising consultant or self-prepare a feasibility analysis using a financial construction cash flow model and template available from the Financial Services Group
  

• Submit the completed outsourced or self-prepared feasibility study to the chief financial officer
  

• Have location representatives meet with the chief financial officer and the Construction Department (if required during the initial review process)
  

If a loan is required, locations and any archdiocesan department must follow the loan requirements in the Approv​​al Process. For guidance on receiving pledges, see "Pledges" under Restricted or Designated Donations and Funds​.

6.2.4.2 Carnivals and Fiestas

Many city, county, and state laws, ordinances, and regulations apply to the types of activities conducted at carnivals or fiestas.

For instance, if alcoholic beverages are served, the location must obtain the proper license from the California Department of Alcoholic Beverage Control. If food is served, contact the department of public health for appropriate food vending permits. See also the Rules for Shared Use of the Kitchen by Food Service Provider & School/Parish Staff and Groups. Police and fire department permits may also be required.

A location must use the archdiocesan Carnival/Fiesta Event Agreement when holding a carnival or fiesta.

6.2.4.3 Scrip

Scrip programs may benefit locations by offering a very small percentage of commission on the total volume of scrip sold. Scrip comes in the form of a prepaid gift card for a variety of vendors. When evaluating whether to begin or continue a scrip program, locations should consider:

• The cost of purchasing the scrip
  

• The cost of paying staff to administer the program
  

• The taxes that may be due if scrip is sold online
  

• The continuing risk of theft, fraud, and loss
  

The archdiocese does not encourage the sale of scrip as a means of financial support. However, if a location undertakes a scrip program, it must establish safeguards and be assured of the integrity of the scrip company. Scrip should never be given to parents/guardians, parishioners, or volunteers to sell without proper safeguards, training, and supervision. Refer questions about scrip sales to the Offic​e of the Legal Counsel.

A scrip program requires controls for:

• Ordering by purchasers
  

• Depositing purchasers' checks
  

• Ordering scrip from the scrip company
  

• Matching and distributing scrip gift cards
  

Specific rules for scrip management include:

• Storing scrip in a secure, locked, fire-resistant cabinet or safe
  

• Logging the scrip purchases made by the location either electronically (e.g., in an Excel spreadsheet) or manually for each vendor by a unique identifying code or number of each scrip or gift card
  

• Checking off which scrip is sold by each identifying code or number and by the staff member distributing the scrip
  

• Recording the name of the purchaser
  

• Periodic physical inventory of scrip available, at least monthly

Locations participating in a scrip program should establish a separate scrip account with the same required signatures as the location account. Scrip companies frequently require direct withdrawal arrangements through ACH (automatic clearing house) accounts. However, if a scrip company is not financially stable, an ACH account enables the company to take funds and not deliver scrip.

Locations that are considering scrip programs or are incurring problems with their scrip providers must consult with the archdiocesan Office of the Le​gal Counsel​.

6.2.4.4 Bingo Program

The current policy of the archdiocese neither encourages nor discourages bingo as a form of fundraising. However, if a bingo program is adopted as a means of financial support, all federal, state, and city ordinances governing such a program must be strictly observed.

The only type of game permitted by the state statute is a bingo game that is defined as "A game of chance in which prizes are awarded on the basis of designated numbers or symbols on a card that conform to numbers or symbols that are selected at random."

This definition includes the use of pull-tab games, but any use of poker or punch cards is strictly illegal.

Bingo Account

Pay special attention to the handling, recording, and depositing of revenue for this program. Cash controls are critical to the success of bingo. A monthly report outlining income and expenditures must be prepared and maintained at the location. The law requires locations to maintain bingo accounts separately from the location's operating account. The same signatories​ are required as the location's operating account(s). Disbursements from the bingo account should only be for bingo-related expenses. The location may only transfer "profits" from the bingo account into an​ operating account to be used for the location's charitable purposes.

Bingo Workers

Bingo workers are supposed to be volunteers. It is a misdemeanor for any person to pay or receive a profit, wage, or salary from any bingo game. However, security personnel employed by the organization conducting the bingo game may be paid from the revenues of bingo games. Bingo workers who are employees must be paid from a non-bingo account such as the location's general account. Their compensation is subject to income tax and therefore subject to withholding. If the paid bingo workers are not employees and the amount paid to an individual is $600 or more for the calendar year, the location has to provide a Form 1099 to the affected individual.

Bingo Licensing

A bingo game cannot be legally conducted in any location unless:

• the government of the city for the location, or the county government, if a location is in an unincorporated area, has passed an ordinance permitting bingo games;
  

• the location has secured the necessary license or permit under the provisions of the city's or county's ordinance; and
  

• the bingo license is secured in the name of the location and not an individual.
  

When applying for the license, the completed application form and a copy of the ordinance permitting the conduct of bingo games must be sent to the Financial Services Group or the Office of the Legal Counsel, which will provide supporting documents, if necessary.

Bingo Regulations

• California law provides that the bingo game shall be operated only on property owned or leased by the charitable organization and that is used by the organization for performance of the purposes for which the organization was established.
  

• The corporation that owns the property must obtain the permit for the conduct of bingo games.
  

• Proceeds may be used for the welfare, educational, and religious purposes of the corporation whose property is used. For example, proceeds may be used to support the school.
  

• No minor may be permitted to participate in any bingo game.
  

• No person may receive a profit, wage, or salary from any bingo game. A violation of this provision may be punishable by a fine up to $10,000.
  

• The bingo game must be operated and staffed only by members of the location or non-profit charitable organization that established it and those members shall not receive a profit, wage, or salary from the game.
  

• No person may participate in a non-remote caller bingo game unless he or she is physically present at the time and place where the game is being conducted.
  

• The total value of the prizes awarded during the conduct of any bingo game cannot exceed $500 in cash or kind or both for each separate game that is held.
  

• Each entrant should be aware of all the regulations governing bingo under the ordinance of the local agency issuing the permit.
  

Remote Caller Bingo

The State of California allows for remote caller bingo under a series of state and local laws and regulations. The archdiocese is not licensed under the remote caller bingo protocols. Any location considering remote caller bingo must contact the archdiocesan Office ​of the Legal Counsel.​

6.2.4.5 Casino Nights, Monte Carlo Nights, and Similar Fundraisers

The Gambling Control Act​ ​section on Nonprofit Organization Fundraisers (Article 17 is on page 54) imposes regulations on how nonprofit organizations in California may conduct fundraisers such as "casino" or "poker" or "Monte Carlo" nights.

The principal requirements of the regulations are as follows:

• Tax-exempt, nonprofit organizations qualified to do business in California that have been in existence for at least three years (this applies to all parishes and the archdiocesan and parish schools) may conduct one fundraiser per calendar year using controlled games ("casino" or "poker night").
  

• "Controlled games" are defined as any poker or pai gow game, state-approved games played with cards or tiles or both, and any game of chance, including any gaming device, played for currency, check, credit, or any other legally allowed thing of value. Slot machines and other games, including roulette, craps, twenty-one, or any banking or percentage game played for anything of value, are prohibited. (Note: Raffles and bingo are subject to separate regulations.)
  

• The organization holding the casino night must register with the Bureau of Gambling Control every year it holds the event. The registration fee at present is $100. The organization must register using the Fundraiser Annual Registration​ and be approved before it can conduct the casino night. See the Nonprofit ​Organization Gambling Fundraiser Registration Program from the state's Office of the Attorney General.​

• The application form requires that the Employer Identification Number (EIN), the corporate number issued by the Secretary of State, the organization number issued by the Franchise Tax Board, or the California charitable trust identification number of the eligible organization be provided. Although locations each have their own EIN, to avoid rejection of the registration, include with the application form a copy of the United States Conference of Catholic Bishops Tax Group Ruling letter with copies of the page from The Official Catholic Directory that lists the location. The Franchise Tax Board Entity Status Letter for a location can be obtained online. Contact the archdiocesan Office of ​​the Legal Counsel​ at 213-637-7511 for help in completing this part of the form. If there are any other questions about this registration, contact:
  

California Department of Justice
Bureau of Gambling Control
Phone: 916-227-3584
Fax: 916-227-2342
​Email: GamblingControl@doj.ca.gov​

6.2.4.6 Raffles

California law regulates the conduct of raffles under Penal Code Section 320.5 Charitable Raffles. ​A "raffle" means a scheme for the distribution of prizes by chance among persons who have paid money for paper tickets that provide the opportunity to win these prizes, where all of the following are true:

• Each ticket is sold with a detachable coupon or stub, and both the ticket and its associated coupon or stub are marked with a unique and matching identifier.
  

• Winners of the prizes are determined by draw from among the coupons or stubs described above that have been detached from all tickets sold for entry in the draw.
  

• The draw is conducted in California under the supervision of a natural person who is 18 years of age or older.
  

• At least 90% of the gross receipts generated from the sale of raffle tickets for any given draw are used by the eligible organization conducting the raffle to benefit or provide support for beneficial or charitable purposes inside the state of California. The proceeds may not benefit officers, directors, or members of the organization—in other words, raffle funds may not be used to pay for the administration or other costs of conducting the raffle and "50/50" raffles are not allowed.
  

The rules of the raffle should be announced to the public buying the tickets. See the Raffle Rules and Regulations (sample​). In conducting the raffle, no gaming machine, apparatus, or device can be used, whether or not that machine, apparatus, or device meets the definition of slot machine.

The raffle cannot be operated over the Internet. However, the raffle can be advertised on the Internet. The following information may be given in the ads:

• Lists, descriptions, photographs, or videos of the raffle prizes
  

• Lists of the prize winners *Provided that the raffle rules stipulate that by buying a ticket, the winner agrees to participate in publicity, including having his or her name posted on the Internet and in other media
  

• Rules of the raffle
  

• Frequently asked questions and their answers
  

• Raffle entry forms, which may be downloaded for manual completion; entry forms MAY NOT be submitted to the parish or school via the Internet
  

• Raffle contact information, including the organization's name, address, telephone number, fax number, or email address
  

A raffle does not have to meet any of these requirements if

• tickets are distributed generally and indiscriminately at no cost;
  

• tickets are offered in general on the same terms and conditions as the tickets for which a donation is given; and
  

• participants are not required to pay for a chance to win.
  

Note: Nonprofit religious entities such as parishes and archdiocesan and parish schools do not need to register prior to conducting a raffle or file a report about the raffle so long as all the rules are followed in detail. See the Frequently Asked Questions ​about raffles from the California Office of the Attorney General.

No Mailing

Federal law prohibits mailing raffle tickets that are sold for a specified price or a required donation. This includes raffles that indicate that a free ticket may be available upon request or by some other means. Only raffle tickets that are entirely free of charge may be mailed. Purchases by mail of raffle tickets, whether by cash, check, or credit card, are also prohibited. Violators of the law are subject to fine or imprisonment of up to five years.

Tax Reporting and Withholding

Individual taxpayers are generally required to report and pay taxes on any net winnings from wagers. Locations must report the prize to the Internal Revenue Service if the prize is $600 or more and the payout is at least 300 times the amount of the wager (the price of the ticket or the amount donated for the ticket). If the prize is more than $5,000, the location has to withhold regular gambling taxes as follows:

• Winners must complete IRS Form 5754, made under penalty of perjury, stating their identity and the identity of any others entitled to the prize.
  

• The location must file with the IRS a Form W-2G based on the information provided in Form 5754. The Form W-2G is used for all prizes that are more than the price of the ticket plus $600 (e.g., if the ticket price is $10, and the prize is $600, then Form W-2G is not required; if the ticket price is $25, and the prize is $650, then Form W-2G is required).  A copy of the Form W-2G is given to the prize winner.

• The location must use Form 1096 to transmit Form W-2G to the IRS.
  

• Regular gambling withholding of 25% applies to winnings of more than $5,000. If the location fails to withhold correctly, it is liable for the tax. For example, the top prize is $6,000. The winner paid $100 for the ticket. Because the proceeds are more than $5,000 ($6,000 - $100 = $5,900), the location must withhold $1,475 ($5,900 x 25%) from the payout and remit that amount to the IRS.
  

• Backup withholding of 28% applies to winnings that are more than $600 and are more than 300 times the amount of the wager, if the winner fails to provide correct taxpayer identification.
  

• For noncash prizes, the winner must pay the location 25% of the fair market value of the prize minus the amount of the wager if the noncash prize is valued at more than $5,000. For example, the top prize is a motorcycle valued at $18,000. The winner paid $250 for the ticket. The prize is more than $5,000, so the winner must pay to the location $4,437.50 ($17,750 x 25%), which the location must remit to the IRS.
  

• If the location pays the taxes as part of the prize, the value of the prize must be increased by 33.33% of the fair market value of the prize. The location reports the increased amount to the IRS on Form W-2G. For example, for the raffle prize mentioned in the previous bullet point, the location pays the tax on the motorcycle. It reports the value of the prize as $17,750 x 1.3333% = $26,666.08.
  

See Tax-Exempt Organizations and Raffle Prizes – Reporting Requirements and Federal Income Tax Withholding for more details.

6.2.4.7 ​Fundraising Online

The internet provides various platforms for raising funds online. These include direct donations to the recipient (e.g., a donate button on the location's website); direct contributions to a recipient through a third party website (e.g., GoFund​Me); indirect donations from a third party to an entity through on​line purchases (e.g., Amazon​Smile); on-line auctions or sweepstakes offers. For advice, locations can contact the Office of Development.​ 

All online methods of raising funds must be under the direct control of the location itself and not an individual or group. The requirements of maintaining financial security, personal information privacy and protection against internet hacking are complex. Therefore, locations must ensure that their online donation or fundraising presence is set up and managed by individuals who are professionally trained in constructing and managing websites. All contracts with on-line fundraising companies must be submitted for review and approval to the Office of Legal Counsel​.

6.2.4.8 Raising Funds for Foreign Organizations

​​The Society for the Propagation of the Faith is the preferred means for providing charitable support to foreign organizations. If, for good reasons, a pastor does not consider the Society for the Propagation of the Faith to be the best conduit for parish charity, the Guidelines on Raising Ta​x-Deductible Donations for Overseas Charitable Organizations apply to a parish or to any group authorized by a pastor to raise funds for the purpose of supporting foreign charities or missions. Because the archdiocese has a duty to shepherd resources wisely and well, the Guidelines on Raising Tax-Deductible Donations for Overseas Charitable Organizations, the Foreign Charities Min​istry Request for Proposal (sample)​, and the Grant A​pplication are designed to ensure that fundraising activities meet all legal requirements so that both donors and recipients can enjoy fully the intended benefits of Christian charity and generosity.​​

6-3-21