Does your unit hold raffles? If so, be aware that there are several restrictions and requirements surrounding raffles. See below for further details:
- Raffles (from an IRS standpoint) are revenue-generating activities which sell raffle tickets to participants, where the cost of the raffle ticket is essentially a wager by the participant for a chance to win a prize. At the conclusion of the raffle, one (or several) tickets are drawn at random to determine the winner(s).
- Raffles differ from prizes and awards, as prizes and awards to students, employees, or non-employees do not involve a wager by the participants the way a raffle does.
- Raffles also differ from activities where small token gifts are given as door prizes as an incentive to attend an event (such as a holiday party). Even though those activities may loosely be referred to as a “raffle”, they are not truly a raffle from the IRS standpoint since no wager was placed by the participants. Those are simply token appreciation gifts that should be charged to account code 124901.
- Per Section 18.11 (Raffle Winnings) of policy, all raffles must be licensed by the municipality in which they are held before the raffle occurs.
- Section 230 ILCS 15/3 of the Illinois Complied Statutes specifies the information that is required on the license application. If a unit truly wants to hold a raffle, they should contact the applicable municipality on the license process for further details.
- Proceeds received from the sale of raffle tickets must be deposited as non-gift revenue through the University of Illinois Foundation via a Gift Transmittal Form.
- Raffled property (i.e., the raffle prizes) must be donated from external parties explicitly for the purpose of the raffle. These donors are responsible for providing the fair market value (FMV) of the donated items that are being raffled.
- Property obtained with University of Illinois System funds (or property otherwise owned by the system) may not be raffled.
- For example, units are not allowed to use university funding to purchase iPads or laptop computers to give away as raffle prizes.
- The system is required to report all raffle winnings as a taxable event to the IRS if sum of the raffle prize's FMV less the cost of the winner’s raffle ticket wager totals $600 or more.
These are just some of the many requirements surrounding raffle activities. For further details, refer to Section 18.11 (Raffle Winnings) of the Business and Financial Policies and Procedures.
Contact
For further details, feel free to reach out to one of our applicable subject matter experts by searching on “Gift Funds” within the Business and Finance Who to Ask list.
In addition, the Tax Compliance and Analysis office is another great resource that can provide further details if needed. They can be reached by calling (217) 244-8359.
