Lotteries; Bingo; Raffles; Tax Exempt Organization

Subject:

Lotteries; Bingo; Raffles; Tax Exempt Organization

Requested By:

Captain D. G. Jenkins Greensboro Police Department Vice/Narcotics Division

Question:

May an organization which is exempt from federal income taxation pursuant to 26 U.S.C. 501 (c)(7) and exempt from state taxation pursuant to N.C.G.S. 105-130.11(6) qualify as an exempt organization for the purposes of conducting bingo games and raffles pursuant to N.C.G.S. 14

292.1 subsections (a) through (k)?

Conclusion:

No.

The type organization which is exempt from federal income taxation pursuant to 26 U.S.C. § 501(c)(7) is specifically delineated. 26 U.S.C. § 501(c)(7) reads as follows:

"(7) Clubs organized for pleasure, recreation, and other nonprofitable purposes, substantially all of the activities of which are for such purposes and no part of the net earnings of which inures to the benefit of any private shareholder."

The type organization which is exempt from North Carolina income taxation pursuant to

N.C.G.S. § 105-130.11(6) is also specifically delineated. N.C.G.S. § 105-130.11(6) reads as follows:

"(6) Clubs organized and operated exclusively for pleasure, recreation, and other nonprofitable
purposes, no part of the net earnings of which inures to the benefit of any private stockholder or member.”

The type organization which may qualify as an exempt organization for purposes of conducting
bingo games and raffles pursuant to N.C.G.S. § 14-292.1 subsections (a) through (k) is
specifically delineated by subsection (b)(1) of N.C.G.S. § 14-292.1. Subsection (b)(1) of

N.C.G.S. § 14-292.1 contains the definition of such exempt organizations for purposes of that statute and it reads as follows:

"(b) For purposes of this section, the term:

(1) "Exempt organization" means an organization that has been in continuous existence in the county of operation of the raffle or bingo game for at least one year and that is exempt from taxation under sections 501(c)(3), 501(c)(4), 50(c)(8)(sic), 501(c)(10), 501(c)(19), or 501(d) of the Internal Revenue Code or is exempt under similar provisions of North Carolina General Statutes as a bona fide nonprofit charitable, civic, religious, fraternal, patriotic or veterans’ organization or as a nonprofit volunteer fire department, or as a nonprofit volunteer rescue squad or a bona fide homeowners’ or property owners’ association. (If the organization has local branches or chapters the term "exempt organization" means the local branch or chapter operating the raffle or bingo game.)"

Internal Revenue Code section 501(c)(7) is not found among those sections listed in subsection (b)(1). Further, N.C.G.S. § 105-130.11(6) is not a provision similar to the Internal Revenue Code sections listed in subsection (b)(1) since G.S. § 105-130.11(6) is similar to the Internal Revenue Code section 501(c)(7) which is quoted above.

Further, an organization with a tax exempt status defined by Internal Revenue Code section 501(c)(7) is not "a bona fide nonprofit charitable, civic, religious, fraternal, patriotic or veterans’ organization" as required in the definition of "exempt organization" in subsection (b)(1) of

N.C.G.S. § 14-292.1. Nor is such organization one of the remaining organizations named in subsection (b)(1).

The definition of exempt organization in subsection (b)(1) of G.S. § 14.292.1 is very specific. Unless the exempt organization has one of the tax exempt statuses listed in subsection (b)(1), the organization does not qualify as an exempt organization for the purpose of conducting a bingo game or raffle pursuant to G.S. § 14-292.1 subsections (a) through (k).

Therefore, an organization which is exempt from federal income taxation pursuant to 26 U.S.C. 501(c)(7) (commonly referred to as Internal Revenue Code section 501(c)(7)), may not qualify as an exempt organization as defined in subsection (b)(1) of N.C.G.S. § 14-292.1 for purposes of conducting bingo games and raffles pursuant to N.C.G.S. § 14-292.1 subsection (a) through (j).

N.C.G.S.

§ 105-130.11(6) cannot qualify such an organization for purposes of conducting bingo games and raffles pursuant to N.C.G.S. § 14-292.1 subsections (a) through (j). The above conclusions do not prevent such an organization from conducting bingo games purusant to

N.C.G.S.

§ 14-292.1 subsection (1), which permits any organization or person to conduct bingo games when the only prize in cash or merchandise is ten dollars ($10.00) or less.

Rufus L. Edmisten Attorney General

Acie L. Ward Assistant Attorney General