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Raffles

Revised: July 1, 2007

Also refer to Signature Authority Policy

Table of Contents

Raffles Policy
Raffle Defined
Regulations
Conducting Raffles Procedure
Value Defined
Additional Information

Raffles policy

The University follows all applicable Federal and state regulations with regards to the reporting of raffles.

Raffle defined

The distribution of prizes by chance among persons who have paid money for tickets which provide the opportunity to win prizes.

Regulations

The following regulations apply:

  • Amounts paid for raffle tickets purchased from the University will not be counted as gifts or charitable contributions.
  • The University will comply with tax withholding provisions for prizes in accordance with Internal Revenue Code Section 3402(q)(1).
  • The University will withhold state taxes on proceeds paid to nonresident individuals in accordance with California Revenue and Tax Code Section 18662.
  • The University will report winnings from raffles (less the amount wagered) on Form W-2G.
  • The University will comply with all applicable provisions of California Penal Code Section 320.5.

Conducting raffles procedure

Follow the procedure below to conduct a raffle:

Step Action
1 Notify the University's Controller in writing no later than August 1 each year for each raffle to be conducted between September 1 through August 31.
2 Department sells raffle tickets.
Note: Raffle tickets may not be sold over the Internet or through the mail. Department must notify purchasers that taxes are the responsibility of the winner. Taxes will be withheld from all cash prizes meeting certain thresholds (see below). Taxes withheld will be reported on Form W-2G. Taxes for non-cash prizes will be paid by the University, remitted on the winner's behalf, and reflected on Form W-2G as both additional winnings and taxes withheld.
3 Department tracks all ticket sales and all expenses associated with raffle and prepares Excel schedule reconciling ticket sales to funds collected and detailing any expenses associated with the raffle (i.e., printing costs, etc.).
Note: For any item donated having a value ≥$600, the department must obtain independent written verification of the value. The donor's estimate of value is not acceptable.
4 Raffle conducted and winner(s) selected. The next step depends on both the type and amount of the prize:
If the prize is... Proceed to...
Cash Step 5.
All others (i.e., gift certificates and tangible personal property, etc.) Step 6.
5 Take the appropriate action below depending upon the amount of the cash prize:
If the amount of the prize is... Then...
$600 - $4,999

Winner must complete Form W-9.
Proceed to Step 7.
≥ $5,000 and winner is a California resident Winner must complete Form W-9 and 25% must be withheld from gross proceeds. Prepare two Authorization for Payment forms made payable to:
  • Winner for amount of net proceeds (i.e., prize amount less 25%). Payment is not 1099 payment.
  • Internal Revenue Services equal to 25% of gross proceeds
Proceed to Step 7.
≥ $5,000 and winner is not a California resident

Winner must complete Form W-9 and 32% must be withheld from gross proceeds. Prepare Authorization for Payment forms made payable to:

  • Winner for amount of net proceeds (i.e., prize amount less 32%). Payment is not 1099 payment.
  • Internal Revenue Service for amount equal to 25% of gross proceeds.
  • Franchise Tax Board for amount equal to 7% of gross proceeds.
Proceed to Step 7.
6 For prizes other than cash, take the appropriate action below depending on the value of the prize:
If the value of the prize is... Then...
≥ $5,000 and winner is a California resident

Prepare Authorization for Payment form made payable to Internal Revenue Service equal to 33.33% of the value of the prize less the wager placed.

Proceed to Step 7.
≥ $5,000 and recipient is not a California resident

Prepare Authorizations for Payment forms made payable to:

  • Internal Revenue Service equal to 33.33% of the value of the prize less the wager placed.
  • Franchise Tax Board equal to 7% of the value of the prize less the wager placed
Proceed to Step 7.
7 Department completes Nonprofit Raffle Report (obtain from Controller) and submits to Controller within ten days of raffle along with:
  • List of prizes ≥ $600 and winner's names,
  • Written verification of value of all prizes ≥ $600,
  • Authorization for Payment form(s) and
  • Completed Form(s) W-9 for each winner receiving a prize ≥ $600.
Note: The Stockton campus will process all Authorization for Payment forms related to raffles for both net proceeds and taxes.

Value defined

Value, as it applies to this policy, is the amount paid by the University for the item or the value of donated items on the date donated. Written independent verification is required by the University for items valued ≥ $600.

Additional information

Contact Payroll Department for additional information.

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