Executive Summary of the Texas Charitable Raffle Enabling Act
Chapter 2002, Texas Occupations Code, Tex. Occ. Code §§ 2002.001-.058
Overview of the Texas Charitable Raffle Enabling Act (the “Act”).
Section 47.03(a)(5) of the Texas Penal Code proscribes intentionally or knowingly selling or transferring raffle tickets for gain, even if the proceeds are used for charitable purposes. See Tex. Penal Code § 47.03(a)(5). However, it is a defense to prosecution under section 47.03(a)(5) that the conduct was authorized by the Act. See id. at § 47.09(a)(l)(B).
The Act allows qualified organizations to conduct a limited number of raffles in a calendar year, provided that the conditions and requirements of the Act are followed. A “qualified organization” means a qualified religious society, qualified volunteer fire department, qualified volunteer emergency medical service, or qualified nonprofit organization, each as defined in the Act.
The Act defines “raffle” to mean “the award of one or more prizes by chance at a single occasion among a single pool or group of persons who have paid or promised a thing of value for a ticket that represents a chance to win a prize.” Tex. Occ. Code § 2002.002(6) (emphasis added). Thus, the Act does not permit an organization to sell tickets or additional chances after the drawing has begun.
The organization may not compensate a person directly or indirectly for conducting a raffle or for selling tickets. However, an employee of the organization may engage in such efforts, but the employee’s effort must not be more than a de minimis portion of the person’s employment duties.
A prize offered or awarded at a qualified raffle may not be money (except for limited exceptions applicable to reverse raffles), and with limited exceptions, a raffle prize cannot exceed $75,000. An organization that offers or awards a raffle prize in the form of money or even a cash refund of all or part of a ticket’s purchase price, violates this prohibition and does not conduct a raffle authorized under the Act.
The Act requires that the ticket price, among other things, must be printed on each raffle ticket sold or offered for sale. Because of the ticket disclosure requirements, a person who sells a raffle ticket for an amount other than its printed ticket price does not conduct a raffle authorized under the Act (except perhaps in a reverse raffle) and thus cannot use the Act as a defense to prosecution under Chapter 47 of the Texas Penal Code.
Select Definitions from the Act, Tex. Occ. Code § 2002.003.
“Qualified Organization” means a qualified religious society, qualified volunteer fire department, qualified volunteer emergency medical service, or qualified nonprofit organization, each as defined in the Act. The most common is a “qualified nonprofit organization.”
“Qualified Religious Society” means an organization or association organized primarily for religious purposes that: (A) has been in existence in Texas for at least 10 years; and (B) does not distribute any of its income to its members, officers, or governing body, other than as reasonable compensation for services or for reimbursement of expenses.
“Qualified Volunteer Emergency Medical Service” means an association that: (A) is organized primarily to provide and actively provides emergency medical, rescue, or ambulance services; (B) does not pay its members compensation other than nominal compensation; and (C) does not distribute any of its income to its members, officers, or governing body other than for reimbursement of expenses.
“Qualified Volunteer Fire Department” means an association that: (A) operates fire-fighting equipment; (B) is organized primarily to provide and actively provides fire-fighting services; (C) does not pay its members compensation other than nominal compensation; and (D) does not distribute any of its income to its members, officers, or governing body, other than for reimbursement of expenses.
“Qualified Nonprofit Organization” means, essentially, the organization must:
(1) not distribute any of its income to its members, officers, or governing body, other than as reasonable compensation for services or for reimbursement of expenses;
(2) have existed for at least the three preceding years;
(3) not devote a substantial part of its activities to attempting to influence legislation or participate in any political candidate campaign; and
(4) be exempt from federal income tax under section 501(c) of the Internal Revenue Code.
Subsidiary Organization. An organization that is a local chapter, subsidiary, unit, or similar affiliate (generally, a “subsidiary”) of a Texas nonprofit corporation or a foreign corporation holding a certificate of authority to conduct affairs in Texas may also qualify as a “qualified nonprofit organization” under the Act if the subsidiary meets the above requirements for “qualified nonprofit organization” and a few others, to wit:
(1) Both the subsidiary and the parent must satisfy requirement (1) above;
(2) The subsidiary must have existed for the three preceding years and as a subsidiary of the parent during that period;
(3) Both the subsidiary and the parent must satisfy requirement (3) above, and
(4) requirement (4) above must be met for either the subsidiary or the parent.
An organization is considered to devote a substantial part of its activities to attempting to influence legislation if, in any 12-month period in the preceding three years, more than 10% of the organization’s expenditures were made to influence legislation.
Raffle Authorized, Tex. Occ. Code § 2002.051.
A qualified organization may conduct a raffle subject to the conditions imposed by the Act.
Time and Frequency Restrictions, Tex. Occ. Code § 2002.052.
A raffle is not authorized if the organization awards prizes in the raffle in a calendar year in which the organization has previously awarded prizes in four other raffles. A raffle conducted in a preceding calendar year for which a prize or prizes are awarded on a later date that occurs in a subsequent calendar year is not included in the number of raffles for which prizes are awarded by the organization in that subsequent calendar year.
Before selling or offering to sell tickets for a raffle, a qualified organization shall set a date on which the organization will award the prize or prizes in a raffle. The organization must award the prize or prizes on that date unless the organization becomes unable to do so and, in that event, the organization may set another date not later than 30 days from the date originally set. If the prize or prizes are not awarded within the 30-day period, the organization must refund or offer to refund the amount paid by each person who purchased a ticket for the raffle.
Use of Raffle Proceeds, Tex. Occ. Code § 2002.053.
All proceeds from the sale of tickets for a raffle must be spent for the charitable purposes of the qualified organization.
The Act, as interpreted by the Texas Attorney General, allows the organization to use raffle proceeds to pay for the reasonable, incidental, and necessary expenses incurred in conducting the raffle. See Tex. Att’y Gen. Op. No. JC-0046, at pg. 4 (1999) (concluding that the phrase “all proceeds” as used in the Act “means net proceeds after payment of reasonable, incidental, and necessary expenses”).
“Charitable purposes” is defined to mean:
(A) benefitting needy or deserving persons in this state, indefinite in number, by:
(i) enhancing their opportunities for religious or educational advancement; (ii) relieving them from disease, suffering, or distress;
(ii) contributing to their physical well-being;
(iii) assisting them in establishing themselves in life as worthy and useful citizens; or
(iv) increasing their comprehension of and devotion to the principles on which this nation was founded and enhancing their loyalty to their government;
(B) initiating, performing, or fostering worthy public works in this state; or
(C) enabling or furthering the erection or maintenance of public structures in this state.
Restrictions on Promotion and Ticket Sales, TEX. OCC. CODE § 2002.054.
The organization may not:
(1) directly or indirectly, by the use of paid advertising, promote a raffle through a medium of mass communication;
(2) promote or advertise a raffle statewide, other than on the organization’s website or through a publication or solicitation, including social media or electronic mail, provided only to previously identified supporters of the organization; or
(3) sell or offer to sell tickets for a raffle statewide.
The organization may not compensate a person directly or indirectly for organizing or conducting a raffle or for selling or offering to sell tickets to a raffle. However, an employee of the organization may organize and conduct a raffle, but the employee’s work in doing so must not be more than a de minimis portion of the person’s employment duties for the organization.
Ticket Disclosures, Tex. Occ. Code § 2002.055.
The following information must be printed on each raffle ticket sold or offered for sale:
(1) the name of the organization conducting the raffle;
(2) the address of the organization or of a named officer of the organization;
(3) the ticket price;
(4) a general description of each prize having a value of more than $10 to be awarded; and
(5) the date on which the raffle prize or prizes will be awarded.
Single Occasion; Single Pool Requirement.
The term “raffle” is defined in Chapter 2002 to mean “the award of one or more prizes by chance at a single occasion among a single pool or group of persons who have paid or promised a thing of value for a ticket that represents a chance to win a prize.” See TEX. OCC. CODE § 2002.002(6) (emphasis added). Thus, an organization must not sell or auction for sale additional tickets after the beginning of a raffle drawing. See Tex. Att’y Gen. Op. No. GA-0097 (2003) (finding that such a procedure would likely violate the ticket disclosure requirements and other sections of the Act).
If an organization sells a raffle ticket for an amount other than its printed ticket price and/or creates more than a single pool of ticket holders, the raffle is likely not authorized by the Act, and the person or organization may then not use the Act as a defense to prosecution. See Tex. Penal Code § 47.09(a)(1)(B) (allowing the Act as a defense to prosecution to otherwise illegal gambling).
No Resell of Tickets.
The Act does not authorize resale of tickets by ticketholders. Doing so likely violates the Act. Also, if a raffle ticket is resold for an amount other than the price printed on the ticket, then such resales would violate the requirement that “the ticket price” must be printed on each raffle ticket sold or offered for sale. See Tex. Att’y Gen. Op. No. GA-0097 (2003).
Restrictions on Prizes, TEX. OCC. CODE § 2002.056.
A prize offered or awarded at a raffle may not be money, which includes coins, paper currency, or a negotiable instrument that represents and is readily convertible to coins or paper currency. See TEX. OCC. CODE § 2002.002(1-a).
According to the Texas Attorney General, United States savings bonds and prepaid, or “stored-value,” credit cards are not negotiable instruments and thus are not “money” for purposes of section 2002.056 of the Act. See Tex. Att’y Gen. Op. No. GA-0341, at pg. 5 (2005).
The value of a prize (other than a residential dwelling) offered or awarded at a raffle that is purchased by the organization or for which the organization provides any consideration may not exceed $75,000. The value of a residential dwelling offered or awarded as a prize that is purchased by the organization or for which it provides any consideration may not exceed $750,000.
However, if a prize is donated to the organization, and the organization gives no consideration for the prize, its value may exceed $75,000. See Tex. Att’y Gen. Op. No. JC-0046, at pg. 2 (1999).
A raffle is not authorized by the Act unless the organization:
(1) has the prize to be offered in the raffle in its possession or ownership; or
(2) posts bond with the county clerk of the county in which the raffle is to be held for the full amount of the money value of the prize.
Reverse Raffles – Exceptions, Tex. Occ. Code § 2002.0541.
Some of the general rules noted above do not apply to reverse raffles. A reverse raffle is a raffle in which, generally, the last ticket or tickets drawn are considered the wining tickets. In a reverse raffle, the Act permits as a prize, a refund of the purchase price of a ticket (i.e., money), and the organization conducting the reverse raffle may sell or auction off additional tickets to persons who are present at the drawing for a price other than the price printed on the reverse raffle ticket.
Legal Action, TEX. OCC. CODE § 2002.058.
A county attorney, district attorney, criminal district attorney, or the attorney general may bring an action in county or district court for a permanent or temporary injunction or a temporary restraining order prohibiting conduct involving a raffle or similar procedure that:
(1) violates or threatens to violate state law relating to gambling; and
(2) is not authorized by Chapter 2002 or other law.
Venue for the action is in the county in which the conduct occurs or in which a defendant resides.
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