Other Miscellaneous Questions of Merit
1. Is it permissible for a local Club to have a drawing at a meeting at which students of Aggie Moms present receive $50 Aggie Bucks?
Answer: No, for several reasons, this is inadvisable. The drawing would be limited to Club Members’ students and the Club Member must be present to win. This is clearly inconsistent with the community benefit and charitable purpose of 501(c)(3) entities. In addition, there is an annual limit of $25 per gift that would then subject the student recipient of the $50 Aggie Bucks to a gift tax obligation.
2. If you have the same facts as in the preceding item, but instead of the funds coming from revenues of the Club, those present put money in a hat for the drawing, is this permissible?
Answer: Perhaps, but once again, if it is for $50 Aggie Bucks, then the recipient student would also have a gift tax obligation on the amount of gift over $25.
3. What is the difference between a raffle and a drawing?
Answer: A raffle is a situation in which individuals purchase a chance to win. The purchase of the chance is not tax deductible to the person purchasing the chance. An entity may have two raffles per calendar year without complying with all of the laws regulating raffles. In a drawing, there is no purchase of chance, simply a drawing in which someone is awarded a prize.
4. Can outside vendors be invited to a Club meeting to promote the sale of their goods without having the Club being engaged in unrelated business that could jeopardize its tax-exempt status?
Answer: This is inadvisable. If someone like Benjamin Knox comes to speak at a Club meeting, then following the meeting has his artwork available for sale, the sale should occur after the meeting has officially adjourned.
5. Who at the University do I contact to find if there are any new students in my area?
Answer: Please contact: Shervonne Davis, SIMS Project, 1119 TAMU, College Station, TX 77843
6. Is it permissible for a Club to send graduation cards and birthday cards to Club Members’ students?
Answer: Yes.
7. If you sell tickets to attend an event and the event includes a meal, what part of the sale of that ticket is a charitable donation?
Answer: The part that is beyond the service that is received is considered a charitable donation. For example, if there is an event and you sell a ticket for $50 and the meal component of that $50 is just $22, the charitable donation is $28.
8. Our club has historically sold a particular type of candle at Boutique as a fundraiser. Now, one of the members of our club owns a company that sells these candles. Is it permissible for us to purchase the candles from her?
Answer: Yes, you may purchase the candles from your member provided the transaction is done at an arms-length basis and your club is otherwise interested in selling these candles without regard to her involvement with the club.
