Tax Deductable Donation Form

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					Lions Tax and Raffle
Lion Barry J. Boline, J.D.

March 19, 2011
Issues for Today
 What   is a 501(c)(4)?

 What   is a 501(c)(3)?

 What   do we need to know about
 By the very nature of this limited
 discussion, we will be talking about
 generalities which may or may not apply
 in a given situation. This presentation
 should NOT be relied upon as legal
 advice. I would encourage you to contact
 an attorney or tax professional for your
 particular situation.
What is §501(c)?
   Internal Revenue Code § 501(c)
    ◦ Tells us what type of entities don’t have to pay
      Federal Income Tax
    ◦ Provides rules for keeping tax-exempt status

    ◦ There are 24 different exemptions in §501(c)
        We’ll deal with two
          §501(c)(4)
          §501(c)(3)
   Local employee associations

   Civic leagues and other organizations
    concerned with social welfare
   A civic league can be exempt if:
    ◦ Not organized for profit
    ◦ Operated exclusively for promotion of social
    ◦ Must engage primarily in activities to promote the
      common good and general welfare of the people in
      the community
      NOT: political campaigning
      NOT: for recreation of members
      NOT: carrying on business like a for-profit

◦ LCI received 501(c)(4) status in December,

 All Clubs under LCI umbrella also have same status
Deductibility and §501(c)(4)
 Donations NOT tax deductable
 Required to notify contributors
    ◦ Express, conspicuous statement
    ◦ Required on all written, telephone, radio, of
      TV solicitation
   Exception
    ◦ Gross receipts under $100,000
   Created and operated exclusively for
    exempt purposes

   Upon dissolution, all assets go to another
    501(c)(3) or the government
   Exempt Purpose
    ◦   Religious
    ◦   Educational
    ◦   Scientific
    ◦   Testing for Public Safety
    ◦   Literary
    ◦   Athletic
    ◦   Prevention of Cruelty to Children or Animals
    ◦   Charitable
   What is Charitable?
    ◦ Relief of the poor, distressed and
    ◦ Advancement of religion, education or science
    ◦ Building / maintaining public property
    ◦ Lessening the burdens of government
    ◦ Promotion of the social welfare through
      prevention of crime and discrimination or
      advancing the above
 Donations are tax deductable
 Possible special mailing rates
 Right to issue tax exempt bonds
 Possible right to avoid paying sales tax
    ◦ No part of the net income can inure to the
      benefit of any member
          §501(c)(3)                       §501(c)(4)

 Donations deductable             Donations not deductable
 Rigid filing requirements        Simpler to apply for
 File very detailed 990           File less detailed 990
 Close scrutiny by IRS            Little IRS oversight
 Possible postage discount        Varied projects
 Sales tax advantages
 Specific project or purpose

      §501(c)(3) v. §501(c)(4)
§501(c)(3) v. §501(c)(4)
   Why are Lions Clubs 501(c)(4)’s?
    ◦ Not one good answer
      LCI choose not to apply for (c)(3) status
      Administrative v. Activity accounts
      LCI (and clubs) may not have an exclusively
       “charitable purpose” under IRS definition
      Increased filing requirements with (c)(3)
      Much more governmental oversight
Questions about 501(c)?
Gambling in Wisconsin
 Generally ILLEGAL under Federal law
 State law allows certain specific types
    ◦ Raffles
      Class A and Class B
    ◦ Calendar Raffles
    ◦ Bingo
    ◦ Other gambling-type fundraisers
 Two   general types of Raffles

 ◦ Class A (Pre-event sale)

 ◦ Class B (Same day sale)
Class A Raffles
        Pre-Printed Tickets
         ◦ Must have required information on ticket

        Pre-event sales
         ◦ Typically two-part tickets
       Other Class A Rules
   Sales start no more that 270 days before

   Face to Face sales only
    ◦ Stubs cannot be mailed. (USPS says nothing can be
    ◦ No internet sales

   Maximum cost of $100 per ticket
Other Class B Rules
 Tickets must be the same form
 “Bucket Raffles”, once illegal, now legal again
  with only one type of ticket
 All Prizes must be awarded
 Same money gets same number of tickets
 No more than $10 per ticket
       How to Apply
   Go to keyword RAFFLE

   Print out the application form (one for each
    Class, i.e. TWO applications)

   Mail them in with $25 each

   Renew annually
Calendar Raffles
   Must have a Class A license

   Must get Calendar pre-approved
    ◦ Send sample to Department of Gaming
    ◦ They will respond within ten days

   All of the Class A rules apply
   Much more heavily regulated than raffles

   See for more info
Other Charitable Gaming
   Pull Tabs
    ◦ Private games are being supplied illegally or
      under a loophole in Wisconsin law

    ◦ In recent years, the department has referred
      13 cases to local district attorneys for
      prosecution for SALE of pull tabs

                    --The Associated Press ,November 20, 2008
Pull Tabs
   Only Wisconsin Lottery pull tabs are legal

   Any other pull tabs not produced by the
    Wisconsin Lottery are not legal in
Other Charitable Gaming
   Casino Nights
    ◦ Games such as Las Vegas nights where
      participants make a payment or donation in
      order to gamble with play money, and then
      use the play money at the end of the evening
      to bid on prizes . . .
    ◦ constitute ILLEGAL lotteries under Wisconsin
      law. The law does not exempt benevolent or
      nonprofit organizations.
Other Charitable Gaming
   All other promotions in Wisconsin are
    illegal if:

    ◦ They involve a prize

    ◦ They involve giving up something ($$$)

    ◦ They involve chance
So, the Only Legal Gaming in Wisconsin

 Class A and B Raffles (with license)
 Calendar Raffles (with Class A license)
 Bingo (with license)
 Certain Crane games (with license) with
  prizes under $5 each
 Pull Tabs produced by and sold on behalf of
  the Wisconsin Lottery
Additional Resources
Two informative websites:

This PowerPoint presentation can be downloaded
 at www. – look for the
DG Presentations button on the left hand side
Thank You
Other issues not covered but still
 Any service organization may apply for a
  bingo license
 Fee is $10.00 for each bingo occasion plus
  an annual license fee of $5.00
 Additional occupational fee of 1%-2% of
  gross receipts, payable semi-annually
Bingo Rules
 All organizations conducting bingo games
  must be licensed by the Wisconsin
  Division of Gaming
 Every bingo occasion held must be listed
  on the license
 Every bingo organization must maintain a
  separate “bingo checking account”
Bingo Rules
 Each organization must file financial bingo
  occasion reports twice each year
 Twice a year, each licensed organization
  must pay an occupational tax on proceeds
 Every organization conducting bingo must
  have a Seller’s Permit and collect
  sales tax from the players
Bingo Rules
 A comprehensive bookkeeping system
  must be utilized and all records kept for
  least four years
 All profits from operations must be used
  for proper and legitimate expenditures
 All bingo supplies and equipment must be
  purchased from a licensed supplier
Bingo Rules
   Only bingo workers who have no record
    of criminal activity can assist in the
    conduct of bingo

   Location where bingo held cannot be
    owned or operated by anyone with a
    criminal record, or gambling offense
More 501(c)(3) information
   If you have specific questions, please speak
    with a local attorney (it’s a great way to
    make a contact that may turn into a
    member) or search for information at the
    LCI website at

   LCI can steer you toward a company that
    will help you prepare a 501(c) (3) at a
    reasonable price.
Does your club need to be a
   No

   Cost* far outweighs the benefit of tax
    deductibility and possible sales tax benefit
    for most Lions Clubs

    *Document prep, accounting requirements,
     formation requirements, increased regulation
Does your club need to have a
   Maybe

   If you:
    ◦ Have a special, charitable, ongoing project
      where you: expect to collect and spend
      money, can separate the project from the club,
      and will use the benefit of tax deductibility
Does your club need to have a
   Specific Examples:
    ◦ Wisconsin Lions Eye Bank
    ◦ Grafton Lions Park
    ◦ Windsor Heights Lions Food Bank

   Foundations (like LCIF or WLF, but local)
Individual Lions Club Foundation
 Donations are tax deductable to donor
 Must be a separate corporation
 Must have its own Board of Directors
 Must have its own checking account
 Must file its own 990
 Must use all funds for stated purpose of
  foundation, i.e. funds can go from the club
  to the foundation, but not back again
     How to get §501(c)(3)
 File Articles of Incorporation with the DFI
 File Form SS-4 to get EIN
 File Form 1023 with the IRS
 Respond to letter from the IRS
 Get IRS determination letter granting status
 Document prep time – 30 to 40 hours
 Time to get determination – 9 months

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