Vermont Charitable Gaming

Vermont allows nonprofit organizations to conduct charitable gaming as a form of fundraising. To qualify, organizations must be registered as nonprofit corporations that qualify for tax exempt status under the Internal Revenue Service Code (501(c) status) and have engaged in charitable activities. The nonprofit is required to be in existence and active in Vermont for at least one year before operating a game of chance. Qualified nonprofits are not subject to state income taxes.

Charitable games and the organizations that operate them are regulated by the Office of the Attorney General of Vermont (AGO). The gambling laws pertaining to charitable games are constructed to make certain that only nonprofit organizations conduct games of chance and to ensure that the monies earned from the games of chance are used for charitable, educational, religious or civic purposes. Permitted games include raffles, bingo, card games and break-open tickets. Slot machines and other mechanical gambling devices are prohibited.

Vermont has no licensing or reporting requirements per se for operating charitable games of chance. If a nonprofit organization that conducts gaming activities is required to file federal tax form 990, the nonprofit must also file copies of the federal forms with the state tax department. Those nonprofits that do not need to file 990 forms but have gaming gross receipts of more than $10,000 must file a specific form with the state tax department. Organizations are obliged to withhold federal income taxes from gaming winnings, and for prizes of $7,500 or more they must also withhold state taxes. Any state tax withheld from winnings must be reported and paid to the state tax department.

Generally, gaming prizes are limited to $400 per game. However, at one game each day a $1,000 prize may be offered; once each month a $5,000 prize may be offered; and once annually a motor vehicle, boat or firearm worth up to $50,000 may be offered as a prize. In addition, a nonprofit organization may exceed the prize limitation four days in one year. The four days must be at least 20 days apart and the total prize money offered for all games on each of the four days must not exceed $20,000.

A casino event, referred to as casino night, may be held once in a calendar quarter or three times in any calendar year as long as each casino event is at least 15 days apart. Nonprofits may share locations for a casino event, unless sharing would cause the location to exceed the allowable event limits for casino events.

Minors may work at a gaming location during a gaming event, such as selling food and drinks, but they cannot operate or participate in the games. No one is permitted to work and gamble at the same event.

Special rules apply to break-open tickets. A qualified nonprofit organization may sell break-open tickets at its own licensed premises and may also sell break-open tickets at a for-profit bar. However, it can only do so if the nonprofit organization purchases and sells the tickets and handles the money. A for-profit bar is prohibited from buying tickets from wholesalers, selling tickets and handling ticket money, nor can it receive any money from ticket sales. All proceeds from the sale of break-open tickets sold on premises licensed to sell alcoholic beverages (excluding prizes, the wholesale cost of the tickets, and specific legal and accounting expenses) must be used for charitable purposes. A bar could have its liquor license suspended or be banned from selling break-open tickets. Penalties for violating gambling laws in Vermont can be as much as $100,000 and include as many as three years in jail for serious offenses.