Can I offer contests that involve charity donations in South Carolina? What are the requirements?

To conduct contests that involve charity donations in South Carolina, you may consider conducting a savings promotion contest or a raffle.

Savings Promotion Contest

According to SCCL 34-45-30, a financial institution authorized to do business in South Carolina under federal or state law may conduct a savings promotion contest to encourage its depositors to maintain savings accounts and increase personal savings. The contest must comply with the provisions of this chapter and title and be subject to the supervision of the appropriate state or federal regulatory agency of the participating financial institution.

Raffle

To conduct a raffle, a nonprofit organization must be recognized by the South Carolina Department of Revenue and the United States Internal Revenue Service as exempt from federal and state income taxation pursuant to Internal Revenue Code Section 501(c)(3), 501(c)(4), 501(c)(6), 501(c)(7), 501(c)(8), 501(c)(10), 501(c)(19), or 501(d), or be a class, department, or organization of an educational institution, as defined in Chapter 56, Title 33. The nonprofit organization must also be organized and operated for religious, charitable, scientific, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals. The nonprofit organization must register with the Secretary pursuant to the requirements of Chapter 56, Title 33, unless it is exempt from or not required to follow the registration requirements of Chapter 56, Title 33, or is a governmental unit or educational institution of this State.

Requirements for Raffles

According to SCCL 33-57-140, a raffle authorized pursuant to this chapter must comply with the following requirements:

• No less than ninety percent of the net receipts of a raffle must be used for the charitable purpose of the nonprofit organization.
• No receipts of a raffle shall be used for any expenditure or activity which would subject an organization exempt from taxation under Internal Revenue Code Section 501(c)(3) or its managers to revocation of its tax-exempt status or excise taxes under the Internal Revenue Code, including directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office or engaging in an excess benefit transaction with a person who would be a disqualified person if the nonprofit organization were exempt from taxation under Internal Revenue Code Section 501(c)(3).
• A nonprofit organization shall not enter into a contract with any person to have that person operate raffles on behalf of the nonprofit organization.
• A nonprofit organization shall not lend its name nor allow its identity to be used by any person in the operating or advertising of a raffle in which the nonprofit organization is not directly and solely operating the raffle.
• A nonprofit organization conducting a raffle may advertise the event. An advertisement, in whatever form, for a raffle must name, within the advertisement, the nonprofit organization sponsoring the event, the charitable purposes for which the net receipts shall be used, and a statement of the proportion of the gross receipts of all raffles conducted by the nonprofit organization in the most recent two years in which the nonprofit organization conducted raffles which were not applied to charitable purposes.
• A raffle shall be conducted only by a qualified and authorized nonprofit organization through its directors, bona fide employees, and unpaid volunteers none of whom shall receive compensation for their services in conducting the raffle, except that bona fide employees of a nonprofit organization may receive their regular and ordinary compensation.
• No member, director, officer, employee, or agent of a nonprofit organization, a member of the family of any of those persons, or an entity in which a person described in the previous two categories holds a thirty-five percent ownership interest is allowed to receive any direct or indirect economic benefit from the operation of the raffle other than being able to participate in the raffle on a basis equal to all other participants, except that bona fide employees may receive reasonable compensation for services rendered in furthering the charitable purposes of the nonprofit organization from raffle proceeds.
• Noncash prizes shall not be redeemed for money from the nonprofit organization or from any other entity that redeems noncash prizes awarded by raffles for money in the ordinary course of business.
• No raffle drawing event shall be held on Christmas Day.
• Raffle drawings must be conducted in accordance with local building and fire code regulations.
• An individual prize awarded to each winner in a raffle shall not exceed a maximum fair market value of eighty thousand dollars. No real property shall be offered as a prize in a raffle. For each raffle event, the total fair market value of all prizes offered by any nonprofit organization shall not exceed three hundred thousand dollars.

Restrictions on Raffles

According to SCCL 33-57-100, a lottery or raffle of any type whatsoever is unlawful unless it is authorized by Chapter 150, Title 59, the Education Lottery; Article 24, Chapter 21, Title 12, Charitable Bingo; or Chapter 57, Title 33, Nonprofit Raffles for Charitable Purposes. It is the intent of the General Assembly that only qualified tax-exempt entities, which are organized and operated for charitable purposes and which dedicate raffle proceeds to charitable purposes, shall operate and conduct raffles as authorized by this chapter.

According to SCCL 33-57-130, a nonprofit organization is allowed to operate up to four raffles per year. If a nonprofit organization has affiliates or subsidiaries that share a federal Employer’s Identification Number (EIN) with a parent nonprofit organization, meet the requirements of this chapter, and are registered pursuant to Section 33-57-120(C), then each qualified affiliate or subsidiary, in addition to the raffles conducted by a parent nonprofit organization, may operate and conduct up to four raffles per year. Each nonprofit raffle shall continue for not more than nine months from the date the first raffle ticket is sold. No raffle drawing shall be conducted between the hours of midnight and 10 a.m. Local law enforcement officials are authorized to enforce the hours of operation. The restriction on numbers of raffles shall not apply to raffles held by nonprofit organizations that are exempt pursuant to Section 33-57-120(B)(2).

Conclusion

To offer contests that involve charity donations in South Carolina, you may consider conducting a savings promotion contest or a raffle. If you choose to conduct a raffle, your nonprofit organization must meet certain requirements outlined in SCCL 33-57-140. Additionally, raffles are only lawful if authorized by Chapter 150, Title 59, the Education Lottery; Article 24, Chapter 21, Title 12, Charitable Bingo; or Chapter 57, Title 33, Nonprofit Raffles for Charitable Purposes.

Jurisdiction

South Carolina

• Gaming