With the nonprofit organization fund-raising season upon us, certain compliance issues need to be addressed by executive directors, development staff and board members.
Those areas are:
If your organization chooses to run a raffle or other game of chance, you need to register in advance of the event (Form CT-NRP-1) with the California Attorney General’s office (www.ag.ca.gov/charities.php). The required registration period runs on a fiscal year that starts on Sept. 1 through Aug. 31 of the following year. Applications must be submitted before September with a closeout summary report due by Aug. 31 of the following year (Form CT-NRP-2). Registration requires a $20 annual fee and can be completed online.
Remember that California laws require that 90 percent of the gross proceeds raised must go directly to beneficial or charitable programs (“90-10 Rule”). This means you are only allowed 10 percent of the gross proceeds to pay for expenses and the consignment cost of the raffled items. Although popular and regularly offered by organizations in the North Bay, 50-50 raffles are illegal in California. You must follow the 90-10 rule.
Wine is an allowable raffle item, but you need to register with the California ABC for a one day temporary permit (cost $100). This allows the nonprofit organization to serve and accept wine donations as well as allowing patrons to take wine away from the fundraising activity.
Most organizations must register with the CA Board of Equalization (BOE) to get a Sales/Use Tax ID#. Generally, sales tax is required on all applicable live and silent auction items which are offered at fundraising events. Items such as trip packages or gift certificates to restaurants/hotels are exempt from such tax. The dilemma for most not for profit organizations is: 1) do you incorporate the sales tax as part of the donee's cost at checkout or 2) do you pay the sales tax funds out of the gross proceeds for the event?
For gambling-type (Vegas Nights, Poker Tournaments, Bingo etc.) fundraising events, go to www.ag.ca.gov/gambling.charitable.php for reporting and registration requirements.
It is important for nonprofits to obtain up-to-date information on regulations and reporting requirements.
One way to achieve this goal is to attend professional conferences such as the upcoming Pisenti & Brinker LLP/North Bay Business Journal Nonprofit Boot Camps on May 19 at the Napa Valley Opera House and on May 24 at Sonoma Mountain Village.
•••James Caven CPA/ABV, CDFA is a director with Pisenti & Brinker LLP.