West Virginia Code of State Rules
Agency 110 - Tax
Title 110 - LEGISLATIVE RULE STATE TAX DEPARTMENT
Series 110-37 - Charitable Raffles
Section 110-37-2 - Definitions

Universal Citation: 110 WV Code of State Rules 110-37-2

Current through Register Vol. XLI, No. 38, September 20, 2024

2.1. When used in this rule and unless the context clearly requires a different meaning, the following terms have the meaning ascribed in this section.

2.1.1. "Bona Fide Senior Citizen Organi­zation" means any nonprofit organization that is organized and operated solely to provide service to persons who are fifty-five (55) years of age or older. An organization shall be described, and qualified under Internal Revenue Code Section 501(c)(3) and have a determination letter to that effect from the Internal Revenue Service.

2.1.2. "Charitable or Public Service Activity or Endeavor" means any bona fide activ­ity or endeavor which directly benefits a number of people by:
2.1.2.1. assisting them to establish themselves in life as contributing members of society through education or religion;

2.1.2.2. relieving them from disease, distress, suffering, constraint, or the effects of poverty;

2.1.2.3. increasing their comprehen­sion of and devotion to the principles upon which this nation was founded and to the principles of good citizenship;

2.1.2.4. making them aware of or educating them about issues of public concern so long as the activity or endeavor is not aimed at influencing legislation or supporting or participat­ing in the campaign of any candidate for public office;

2.1.2.5. lessening the burdens borne by government or voluntarily supporting, augmenting, or supplementing services which government would normally render to the people;

2.1.2.6. providing or supporting nonprofit community activities for youth, senior citizens or the disabled;

2.1.2.7. providing or supporting nonprofit cultural or artistic activities; or

2.1.2.8. providing or supporting any political party executive committee.

2.1.3. "Charitable or public service organization" or "major organization" means a bona fide, nonprofit, tax exempt organization which is either benevolent, educational, philan­thropic, humane, patriotic, civic, religious, frater­nal or eleemosynary. These organizations shall obtain an Internal Revenue Code Section 501 tax exempt status determination letter from the Inter­nal Revenue Service finding that they are exempt from the federal income taxes under section 501(c)(3), 501(c)(4), 501(c)(8), 501(c)(10), 501(c)(19), or 501(d) of the Internal Revenue Code of 1986, as amended. However, organiza­tions which are subdivisions of the federal, state and local governments do not need to obtain an Internal Revenue Code Section 501 tax exempt status determination letter from the Internal Revenue Service. "Charitable or public service organizations" also includes volunteer fire depart­ments, rescue units or other similar volunteer community service organizations. These organi­zations do not need to obtain an Internal Revenue Code Section 501 tax exempt status determination letter from the Internal Revenue Service. The term "charitable or public service organization" does not include social or political organizations.
2.1.3.1. Test for determining tax exempt status. - In every instance, charitable organizations wishing to obtain a raffle license shall file with their application a copy of their current determination letter from the Internal Revenue Service stating that the organization is exempt from taxes under certain Internal Revenue Code provisions. Requirements for each tax exempt status are set in this paragraph.
2.1.3.1.a. Internal Revenue Code Section 501(c)(3) exempts from federal taxation corporations, community chests, funds or founda­tions which are organized and operated only for:
2.1.3.1.a.1. religious pur­poses;

2.1.3.1.a.2. charitable pur­poses;

2.1.3.1.a.3. scientific pur­poses;

2.1.3.1.a.4. testing for public safety purposes;

2.1.3.1.a.5. literary or educa­tional purposes;

2.1.3.1.a.6. the fostering of national or international amateur sports competi­tion (no part of these organizations' activities can involve the provision of athletic equipment or facilities); or

2.1.3.1.a.7. the prevention of cruelty to children or animals; and,

2.1.3.1.a.8. no portion of its net earnings be given to or benefit any shareholder or individual; no substantial propagandizing may be carried on; no attempts to influence legislation may be carried on; and no participation or inter­vention in political campaigns for candidates may be maintained.

2.1.3.1.b. Internal Revenue Code Section 501(c)(4) exempts from federal taxation nonprofit civic leagues or organizations operated solely for the promotion of social welfare. It also exempts local employee associations in which:
2.1.3.1.b.1. membership is limited to employees of a designated person in a particular municipality; and

2.1.3.1.b.2. all net earnings are given or used solely for charitable, educational or recreational purposes.

2.1.3.1.c. Internal Revenue Code Section 501(c)(8) exempts from federal taxation fraternal beneficiary societies that operate under the lodge system, such as a parent organization which charters local branches, or societies operat­ing for the sole benefit of members of a lodge system fraternity. These organizations shall also provide for the payment of benefits such as life, sick, or accident insurance benefits, to the mem­bers or their dependents.

2.1.3.1.d. Internal Revenue Code Section 501(c)(10) exempts from federal taxation domestic fraternal societies that operate under the lodge system, do not pay benefits and devote their net earnings solely to charitable, religious, scien­tific, literary, educational and fraternal purposes.

2.1.3.1.e. Internal Revenue Code Section 501(c)(19) exempts from federal taxation organizations, auxiliary units, trusts of founda­tions for war veterans. These entities shall be organized in the United States, and no part of their net earnings may benefit any shareholder or individual. Seventy-five percent (75%) of the members shall be war veterans and substantially all of the other members shall be veterans, cadets or spouses, widowers or widows of war veterans.

2.1.3.1.f. Internal Revenue Code Section 501(d) exempts from federal taxation religious or apostolic associations if they have a common treasury. These associations may engage in business which commonly benefits all members if the members include their share as gross in­come on their income tax returns. These amounts are to be considered dividends received.

2.1.3.2. Further references and explanations are contained in Appendix B of this rule.

2.1.4. "Charitable raffle" means a raffle held by a charitable or public service organization of a bona fide senior citizen organization to raise money for a charitable or public service endeavor.

2.1.5. "Charitable raffle board" or "chari­table raffle game" means:
2.1.5.1. a board or other device that has many folded printed slips to be pulled from the board or otherwise distributed without a board on payment of a nominal sum in an effort to obtain a slip or chance that entitles the player to a designated prize;

2.1.5.2. a series of paper cards with perforated break-open tabs, a face value of which is covered or otherwise hidden from view to conceal one or more numbers, letters or symbols, which, on payment of a nominal sum, entitles the player to obtain a chance to a designated prize; or,

2.1.5.3. any other similar game which may be defined by the State Tax Commissioner by legislative rule.

2.1.6. "Commissioner" or "Tax Commis­sioner" means the West Virginia State Tax Com­missioner or his or her duly appointed representa­tive, except as otherwise required by law.

2.1.7. "Concession" means any stand, booth, cart, counter or other facility, whether stationary or movable, where beverages, both alcoholic and nonalcoholic, food, snacks, ciga­rettes or other tobacco products, newspapers, souvenirs or any other items are sold to patrons by an individual or individuals operating the conces­sion.

2.1.8. "Conduct" means to direct the actual holding of a raffle and the playing of raffle games by activities including, but not limited to, selling raffle tickets, selling tip boards or pull tabs, collecting money, drawing winning raffle ticket stubs, verifying winners and awarding prizes.

2.1.9. "De minimis violation" includes a violation the Commissioner finds to not be a material violation if, having regard to the nature of the conduct charged to constitute a violation, and the nature of the attendant circumstances, the Commissioner finds that the violator's conduct:
2.1.9.1. Was within a customary license or tolerance, neither expressly negated by the Commissioner nor inconsistent with the purpose of the law defining the violation;

2.1.9.2. Did not actually cause or threaten the harm or evil sought to be prevented by the law defining the violation or did so only to an extent too trivial to warrant the condemnation of the law;

2.1.9.3. Considered with regard to the totality of the facts and circumstances, cannot reasonably be regarded as envisaged by the Legislature in forbidding the violation; or

2.1.9.4. Resulted from mistake or inadvertent omissions, and was not deliberately committed for the purpose of evading the statutory requirements and restrictions applicable to licensees.

2.1.10. "Employee" means an individual who is an "employee" for purposes of federal income tax withholding, as defined in 26 U.S.C. '3401.

2.1.11. "Expend net proceeds for charita­ble or public service purposes" means to devote the net proceeds of a raffle occasion to a qualified recipient organization.

2.1.12. "Immediate family member" means a person's spouse, mother, father, son, daughter, brother, sister, grandchild, grandparent, mother-in-law, father-in-law or step-child. A legally adopted child of a person is treated for these purposes as a child of the individual by birth.

2.1.13. "Joint raffle occasion" means a single gathering or session at which a series of one or more successive raffles is conducted by two or more licensees. It is also an occasion at which raffle tickets, together with "pull tabs" or "tip boards" are sold and purchased and the winning numbers are revealed. For raffle tickets it also means the occasion of the drawing for the anticipated prize or prizes. For a joint raffle occasion authorized under W. Va. Code '47-21-1 et seq., it means and includes the selling of raffle tickets, but not pull tabs or tip boards, on one day when the drawing for prizes will not be held until a later date; however, joint raffle occa­sion does not mean the selling of pull tabs and tip boards on one day when the drawing for prizes will not be held until a later date.

2.1.14. "Licensee" means any organiza­tion or association granted an annual or limited occasion raffle license.

2.1.15. "Material violation" includes any of the following listed acts or omissions, set forth in W. Va. Code '47-21-1, et seq., (except violations found to be de minimis violations by the Commissioner in accordance with this section), committed by a licensee, or an officer, director, employee, designee, agent or representative of a licensee:
2.1.15.1. Conducting charitable raffle occasions at times or at a location inconsistent with the license application;

2.1.15.2. Failing to timely amend or modify the charitable raffle license in accordance with section 9 of this rule;

2.1.15.3. Not having the raffle license posted at the occasion;

2.1.15.4. Allowing charitable raffle workers to play raffle;

2.1.15.5. Utilizing charitable raffle workers who fail to qualify under W. Va. Code '47-21-1 et seq and this rule;

2.1.15.6. Expending or using charitable raffle proceeds for unauthorized expenses;

2.1.15.7. Distributing charitable raffle net proceeds for purposes other than qualified charitable or public service purposes or for unauthorized purposes;

2.1.15.8. Continuing failure to maintain accurate records;

2.1.15.9. Continuing violations of any nature, subsequent to the licensee having been notified in writing of a violation;

2.1.15.10. Conducting fraudulent charitable raffle occasions; or

2.1.15.11. Obtaining a charitable raffle license under false pretenses or deceptive or fraudulent circumstances.

2.1.16. "Meaningfully associated with the licensee" means persons who are members of the licensee organization, family members of members of the licensee organization, clients of the licensee organization, supporters of the licensee organization, volunteers and employees of the licensee organization.

2.1.17. "Member" means a person who, under the rules or practices of the licensee, may participate in the selection of persons authorized to manage the affairs of the licensee or in the development of policy of the licensee.

2.1.18. "Net proceeds" means the gross receipts (i.e. all moneys connected with participa­tion in raffle games, the sale of supplies and other miscellaneous receipts) from all raffle occasions held during a license period minus the reasonable, necessary and actual expenses of holding the raffle occasions. The expenses of holding the game may not exceed twenty-five percent (25%) of the gross proceeds collected during the entire license period.

2.1.19. "Non-membership organization" or "organization that is not a bona fide membership organization" means an organization which is exempt or qualified to be exempt from federal income taxation under subsection 501(c)(3) or 501(c)(4) of the Internal Revenue Code of 1986, as amended, but does not have bona fide members, or which has bona fide members, the majority of whom cannot operate charitable raffle games over a sustained period of time by reason of physical disability or legal disability or any other bona fide disability.
2.1.19.1. Example 1: An organization which is exempt or qualified to be exempt from federal income taxation under subsection 501(c)(3) or 501(c)(4) of the Internal Revenue Code of 1986, as amended, has only a board of directors. The organization carries out its operations through volunteer workers. The organization is a non-membership organization for purposes of this definition.

2.1.19.2. Example 2: A young persons club (appropriately supported and sponsored by adults, parents and others) is a section 501(c)(3) organization which has members, all of whom are young persons under the age of 16. The members are prevented by law from participating in charitable raffle operations because of their ages (W. Va. Code '47-21-1 et seq.). This young persons club is an organization which is exempt or qualified to be exempt from federal income taxation under subsection 501(c)(3) or 501(c)(4) of the Internal Revenue Code of 1986, as amended, and the organization's bona fide members cannot operate charitable raffle games by reason of a legal disability. This organization qualifies as a "non-membership" organization or an organization that is "not a bona fide membership organization" for the limited purposes of this definition.

2.1.20. "Person" means any individual, association, society, incorporated or unincorpo­rated organization, firm, partnership or other nongovernmental entity or institution.

2.1.21. "Qualified recipient organization" means a charitable or public service organizations as defined in Subdivision 2.1.4 of this rule, which is organized and functions solely to benefit people by charitable or public service activities or en­deavors.

2.1.22. "Raffle" means a game authorized by W. Va. Code '47-21-1 et seq., involving the selling of tickets to participate in the game which entitles the holder or holders to a chance on a prize or prizes. It includes a game authorized by W. Va. Code '47-23-1 et seq., involving the selling of so called "tip boards" or "pull tabs" which when opened or separated reveal a winning prize or combination of numbers or symbols which when read together designate a winning ticket; Provided, That, the selling of "tip boards" and "pull tabs" may only occur in conjunction with a charitable raffle occasion authorized under W. Va. Code '47-21-1 et seq.

2.1.23. "Raffle Occasion" means a single gathering or session at which a series of one or more successive raffles is conducted by a single licensee. It includes an occasion at which raffle tickets, and in conjunction therewith "tip boards" or "pull tabs" are sold and purchased and the winning numbers are revealed. For raffle tickets it also means the occasion for the drawing for the anticipated prize or prizes. For a raffle occasion authorized under W. Va. Code '47-21-1 et seq., raffle occasion means and includes the selling of raffle tickets, but not pull tabs or tip boards, on one day when the drawing for prizes will not be held until a later date; however, raffle occasion does not mean the selling of pull tabs or tip boards on one day when the drawing for prizes will not be held until a later date.

2.1.24. "Residents of this State meaningfully associated with a licensee" means persons that are residents of West Virginia, who are associated with a licensee that is a non-membership organization, who are age eighteen years or older and who are:
2.1.24.1. Clients of the licensee that, for one or more years prior to the date of the applicant's application for a raffle license, or for renewal of a raffle license, whichever is the latter, have regularly or routinely utilized the services of the licensee organization, or

2.1.24.2. regular financial supporters of the licensee organization, or

2.1.24.3. employees of the licensee organization, or

2.1.24.4. volunteers that regularly assist the licensee in delivering its services, and includes

2.1.24.5. the immediate family members of any resident of this State meaningfully associated with a licensee, as defined in this section, provided that the family members are residents of West Virginia.

2.1.25. "Supporters" of the licensee organization includes persons who promote the charitable interests of a licensee through monetary or volunteer assistance, and who uphold and advocate the charitable interests and charitable causes of the licensee.

2.1.26. "Tax-exempt association or organization" means a charitable or public service organization which has received an Internal Revenue Service letter designating them as a tax-exempt organization or association under Internal Revenue Code Section 501.

2.1.27. "Tip board" or "pull tab" means a charitable raffle board or charitable raffle game as defined in this section.

2.1.28. "Volunteers" of a licensee organization means persons who give their services of their own free will to accomplish the charitable purposes of the organization, to furnish the services provided by the licensee organization or to support the charitable raffle operations of the licensee without any express or implied promise of direct or indirect payment, remuneration or gratuity, and having no direct or indirect monetary or legal interest or concern in the licensee organization's charitable purposes, services or charitable raffle operations. For purposes of this definition, a person does not qualify as a volunteer if that individual's services are rendered pursuant to any mandate decision or action of a court, appeals board, parole board or other judicial or administrative body as part of an alternative sentencing program, parole program, sentence, judgement, settlement, plea bargain, or other administrative or judicial action or judgement as if that person's services are rendered pursuant to any state, local, county or administrative requirement for graduation from any high school or other school or institution of learning.

2.1.29. All other terms defined in the W. Va. Code '47-21-1 et seq., have the same mean­ing when used in this rule.

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