• Gaming may be allowed by the IRS but not by a certain state or county.games image by Patrizier-Design from Fotolia.com
  
  The Internal Revenue Service (IRS) determines the eligibility of organizations to be considered "tax exempt." This means that charity-supporting groups such as churches and schools can earn money through fund raising and not have to pay taxes. Certain types of fund raising, including some gaming activities like bingo, are considered tax exempt, particularly when of the workers are volunteers. But Internet bingo, scratch off bingo cards and electronic bingo are not tax exempt. When planning gaming activities for an organization which is considered a charity under Internal Revenue Code section 501(c)(3), one must also review state and local laws as these may prohibit or curtail gaming activities.
  
  

Staying Legal

• If your organization has already received its 501(c)(3) approval from the IRS, the next step before planning any kind of fund raiser that involves gaming would be to check state and local laws. The IRS and the federal government do not recognize bingo and gaming as tax-exempt fund raising activities even though most are used for that purpose. The individual states have their opinion on the fund raising activities and local counties and municipalities may have restrictions about gaming altogether.
  
  

Keeping the 501(c)(3) Status Safe

• Tax-exempt organizations may lose their status if they fail to use the funds raised for charitable purposes or if the funds go to benefit a private individual or private interest. A tax-exempt organization must not use its funds to support political campaigns or lobbying activities and it can not conduct a business that is unrelated to its charity work. Organizations should become familiar with these and other things listed by the IRS references listed at the end of this article that may cause a reversal a 501(c)(3) status.
  
  

Gaming and Record Keeping

• Any exempt organization must keep complete and thorough financial records as part of their responsibilities to the IRS. Poor record keeping could result in a loss of the 501(c)(3) status. The financial records that need to be be maintained are the same as any business: cash receipts and disbursement journals; account payable journals and general ledgers; detailed source documents and tax papers that were filed. Any 501(c)(3) organizations sponsoring gaming activities must provide records showing gross receipts, prize payouts and any other related paperwork. Most states and counties will also have rules and regulations about record keeping. All of these records must be kept until the statute of limitations runs out or about three years.
  
  

Gaming Controls

• Large sums of money can be generated for charity through gaming activities. The money can inspire some people to divert those funds. The IRS highly recommends that there are systems of checks and balances to manage control of the money that is raised. There should be several people who are responsible for signing checks; multiple people counting money and two people overseeing the operation of a fund raiser.