Kentucky Charitable Gaming

In 1992, provoked by widespread corruption associated with bingo operations, legislation (HB5) was passed that established a regulatory agency for charitable gaming. The Department of Charitable Gaming (DCG) was created within the Public Protection Cabinet to license and regulate charitable games, charitable organizations operating charitable games, charitable gaming facilities, manufacturers and distributors within the state. The Charitable Gaming Advisory Commission (CGAC) was also created to assist the DCG in formulating effective policies for the licensing and regulation of charitable gaming. The DGC is required by law to be self-sustaining through collection of fees imposed on licensed charitable organizations. Kentucky law requires that charities retain 40% of their revenue for charitable purposes. For the past decade, there has been more money spent on charitable gaming than wagered on horse racing in Kentucky.

A charitable gaming license authorizes licensed charitable organizations to operate bingo, sell charity game tickets or pull-tabs, hold raffles and host casino nights. Charitable gaming does not include slot machines, electronic video gaming devices, wagering on live sports events or simulcast broadcasts of horse races.

Eligible charitable gaming organizations may be churches, schools, bands, sports programs, veterans groups, fire and rescue departments, animal rights groups, arts organizations, history or museum organizations, and fraternal and civic groups.

There are two types of charitable gaming organization licenses: an exempt license and a regular gaming or non-exempt license. An exempt charitable gaming organization is similar to a non-exempt charitable organization except that it earns $25,000 or less in annual revenue. It may conduct bingo and have festival games of chance, but cannot sell pull-tabs or operate casino nights. Exempt organizations are subject to the same application process; however, they are not required to renew their license each year. They file a simplified annual report with the DCG that serves as their renewal application. No fees are levied on exempt organizations.

To qualify for a non-exempt gaming license, an organization must have an IRS 501(c)(3), (4), (8), (10) or (19) exempt designation, or be a school, state college or university. Before submitting the application, it must have continuously operated as a charity in Kentucky for at least three years and have an office in Kentucky for at least one year. All officers for the charity are listed on the application and a background check is conducted on each. There is a $25 processing fee and a first-time application fee. Renewal application fees are $100, $200 or $300, based on prior year gross receipts. The DCG collects a quarterly fee imposed on non-exempt charitable organizations of 0.0053% of gross gaming receipts. The DGC also collects fees for any modifications to a license before its renewal. Even though charities are tax-exempt, they are all required to pay excise tax and sales tax on gaming supplies.

Applications for a charitable gaming license must be submitted at least 60 days before a gaming event.

Each charitable gaming organization is allowed four special licenses per year, two of which can be for casino-style gambling (roulette, card games, dice games, etc.). Casino-style gambling sessions can last as long as six hours between noon and midnight of the same day. Special licenses can be used for festivals or charity fundraising events. Those events include any event where people come not just to game but also to be involved with other fundraising activities, such as a church festival.

A license is not required for a charitable event if the event held is a game of skill (such as basketball throw, jelly bean count, or a live or silent auction) or for any wheel game (such as a cake wheel) where only noncash prizes, valued at $100 or less, are awarded. A charitable organization does not need a license to conduct a raffle if it is less than four times per calendar year, the total ticket sales for each raffle are $150 or less, and all gross receipts from each raffle are donated to a nonprofit charity.

Licensed charitable gaming organizations must abide by a set of restrictions for the operation of the games they are licensed to hold. Bingo is limited to one session per day and two five-hour sessions per week for a maximum of 10 hours per week, and cannot be held at more than one location within a 24-hour period. The largest prize award allowed for bingo is $5,000, including the value of door prizes.

Individual charity game ticket prizes cannot exceed $599 in value, not including the value of cumulative or carryover prizes awarded in seal card games. Cumulative or carryover prizes in seal card games cannot exceed $2,400. Pull-tabs cannot be sold in bars, other than bars connected with a licensed charitable organization, such as a VFW hall.

A special limited charity fundraising event is limited to one six-hour session and can only be conducted between noon and 1 a.m. Games operated using a special limited license must be played with chips, scrip or imitation money, which can only be purchased through a central bank or cashier at the event. A special license is not needed for a wheel game, such as cake wheel, that awards noncash prizes of less than $100 in value. Special license events cannot exceed 72 consecutive hours.

In February 2006, lawmakers introduced a bill to extend the definition of charitable gaming to include electronic, computer and other technological aids; however, the bill was never acted upon.

Charitable gaming does not include slot machines, electornic video gaming devices, wagering on live sporting events, or simulcast broadcasts of horse races.