KRS § 238.535 — KY Code / Title XIX / Chapter 238 / Section 238.535
238.535 Licensing of charitable organizations conducting charitable gaming -- Exemptions -- Qualifications -- Required information -- Special event raffle license -- Fees -- Escrow
Status: in_force

238.535 Licensing of charitable organizations conducting charitable gaming --

Exemptions -- Qualifications -- Required information -- Special event raffle

license -- Fees -- Escrow.

(1) Any charitable organization conducting charitable gaming in the Commonwealth of

Kentucky shall be licensed by the corporation. A charitable organization qualifying

under subsection (12) of this section but not exceeding the limitations provided in

this subsection shall be exempt from the licensure requirements when conducting

the following charitable gaming activities:

(a) Bingo in which the gross receipts do not exceed a total of twenty-five

thousand dollars ($25,000) per year;

(b) A raffle or raffles for which the gross receipts do not exceed twenty-five

thousand dollars ($25,000) per year; and

(c) A charity fundraising event or events that do not involve special limited

charitable games and the gross gaming receipts for which do not exceed

twenty-five thousand dollars ($25,000) per year.

However, at no time shall a charitable organization's total limitations under this

subsection exceed twenty-five thousand dollars ($25,000).

(2) (a) Any charitable organization exempt from the process of applying for a license

under subsection (1) of this section, shall notify the office in writing, on a

simple form issued by the office, of its intent to engage in exempt charitable

gaming and the address at which the gaming is to occur. Any charitable

organization exempt from the process of applying for a license under

subsection (1) of this section, shall comply with all other provisions of this

chapter relating to the conduct of charitable gaming, except:

1. Payment of the fee imposed under the provisions of KRS 238.570; and

2. The quarterly reporting requirements imposed under the provisions of

KRS 238.550(7), unless the exempt charitable organization obtains a

retroactive license pursuant to subsection (9) of this section.

(b) Before January 31 of the year immediately following the year of exemption, a

charitable organization exempt from licensure under the provisions of

subsection (1) of this section shall file a financial report with the office, on a

form issued by the office, that contains the following information:

1. The type of gaming activity in which it engaged during that year;

2. The total gross receipts derived from gaming;

3. The amount of charitable gaming expenses paid;

4. The amount of net receipts derived; and

5. The disposition of those net receipts.

(3) An exemption that has been granted to a charitable organization for the preceding

calendar year shall be automatically renewed on January 1 of the following year.

(4) If upon receipt of the financial report the office determines that the information

appearing on the financial report renders the charitable organization ineligible to

possess an exemption, the office shall notify the charitable organization that its

exemption is rescinded. The organization may request an appeal of this rescission

pursuant to KRS 238.565.

(5) If the annual financial report is not received by January 31, the exemption is

automatically rescinded unless an extension of no more than thirty (30) days is

granted by the office. The organization may request an appeal of this rescission

pursuant to KRS 238.565.

(6) If an exemption is revoked because an organization has exceeded the limit imposed

in subsection (1) of this section, the organization shall apply for a retroactive

license in accordance with subsection (7) of this section.

(7) If an organization exceeds the limit imposed by any subsection of this section it

shall:

(a) Report the amount to the office; and

(b) Apply for a retroactive charitable gaming license.

(8) Upon receipt of a report and application for a retroactive charitable gaming license,

the office shall investigate to determine if the organization is otherwise qualified to

hold the license.

(9) If the office determines that the applicant is qualified, it shall issue a charitable

gaming license retroactive to the date on which the exemption limit was exceeded.

The retroactive charitable gaming license shall be issued in the same manner as

regular charitable gaming licenses.

(10) If the office determines that the applicant is not qualified it shall deny the license

and take enforcement action, if appropriate.

(11) Once a retroactive or regular gaming license is issued to an organization, that

organization shall not be eligible for exempt status in the future and shall maintain a

charitable gaming license if it intends to continue charitable gaming activities,

unless the charitable organization has not exceeded the exemption limitations of

subsection (1) of this section for a period of two (2) years prior to its exemption

request.

(12) (a) In order to qualify for licensure, a charitable organization shall:

1. a. Possess a tax exempt status under 26 U.S.C. secs. 501(c)(3),

501(c)(4), 501(c)(8), 501(c)(10), or 501(c)(19), or be covered

under a group ruling issued by the Internal Revenue Service under

authority of those sections; or

b. Be organized within the Commonwealth of Kentucky as a local

school district, as a common school as defined in KRS 158.030, as

an institution of higher education as defined in KRS 164A.305, or

as a state college or university as provided for in KRS 164.290. A

common school, a program or organization affiliated with a

common school, or any combination of common schools and

programs affiliated with common schools located within a local

school district may conduct charitable gaming under the local

school district's charitable gaming license;

2. Have been established and continuously operating within the

Commonwealth of Kentucky for charitable purposes, other than the

conduct of charitable gaming, for a period of three (3) years prior to

application for licensure. For purposes of this paragraph, an applicant

shall demonstrate establishment and continuous operation in Kentucky

by its conduct of charitable activities from an office physically located

within Kentucky both during the three (3) years immediately preceding

its application for licensure and at all times during which it possesses a

charitable gaming license. However, a charitable organization that

operates for charitable purposes in more than ten (10) states and whose

principal place of business is physically located in a state other than

Kentucky may satisfy the requirements of this paragraph if it can

document that it has:

a. Been actively engaged in charitable activities and has made

reasonable progress, as defined in subparagraph 3. of this

paragraph, in the conduct of charitable activities or the expenditure

of funds within Kentucky for a period of three (3) years prior to

application for licensure; and

b. Operated for charitable purposes from an office or place of

business in the Kentucky county where it proposes to conduct

charitable gaming for at least one (1) year prior to application for

licensure, in accordance with subparagraph 4. of this paragraph

and paragraph (c) of this subsection;

3. Have been actively engaged in charitable activities during the three (3)

years immediately prior to application for licensure and be able to

demonstrate, to the satisfaction of the office, reasonable progress in

accomplishing its charitable purposes during this period. As used in this

paragraph, "reasonable progress in accomplishing its charitable

purposes" means the regular and uninterrupted conduct of activities

within the Commonwealth or the expenditure of funds within the

Commonwealth to accomplish relief of poverty, advancement of

education, protection of health, relief from disease, relief from suffering

or distress, protection of the environment, conservation of wildlife,

advancement of civic, governmental, or municipal purposes, or

advancement of those purposes delineated in KRS 238.505(10). In order

to demonstrate reasonable progress in accomplishing its charitable

purposes when applying to renew an existing license, a licensed

charitable organization shall additionally provide to the office a detailed

accounting regarding its expenditure of charitable gaming net receipts

for the purposes described in this paragraph; and

4. Have maintained an office or place of business, other than for the

conduct of charitable gaming, for at least one (1) year in the county in

which charitable gaming is to be conducted. The office or place of

business shall be a separate and distinct address and location from that

of any other licensee of the Office of Charitable Gaming; except that up

to three (3) licensed charitable organizations may have the same address

if they legitimately share office space.

(b) 1. A charitable organization that has established and maintained an office

or place of business in the county for a period of at least one (1) year

may hold a raffle drawing or a charity fundraising event, including

special limited charity fundraising events, in a Kentucky county other

than that in which the organization's office or place of business is

located.

2. For raffles, the organization shall notify the Office of Charitable

Gaming in writing of the organization's intent to change the drawing's

location at least thirty (30) days before the drawing takes place. This

written notification:

a. May be transmitted in any commercially reasonable means,

authorized by the office, including facsimile and electronic mail;

and

b. Shall set out the place and the county in which the drawing will

take place.

Approval by the office shall be received prior to the conduct of the raffle

drawing at the new location.

(c) Any charitable organization that was registered with the county clerk to

conduct charitable gaming in a county on or before March 31, 1992, shall

satisfy the requirement contained in paragraph (a)4. of this subsection if it

maintained a place of business or operation, other than for the conduct of

charitable gaming, for one (1) year prior to application in a Kentucky county

adjoining the county in which they were registered.

(13) In applying for a license, the information to be submitted shall include but not be

limited to the following:

(a) The name and address of the charitable organization;

(b) The date of the charitable organization's establishment in the Commonwealth

of Kentucky and the date of establishment in the county or counties in which

charitable gaming is to be conducted;

(c) A statement of the charitable purpose or purposes for which the organization

was organized. If the charitable organization is incorporated, a copy of the

articles of incorporation shall satisfy this requirement;

(d) A statement explaining the organizational structure and management of the

organization. For incorporated entities, a copy of the organizations' bylaws

shall satisfy this requirement;

(e) A detailed accounting of the charitable activities in which the charitable

organization has been engaged for the three (3) years preceding application

for licensure;

(f) The names, addresses, dates of birth, and Social Security numbers of all

officers of the organization;

(g) The names, addresses, dates of birth, and Social Security numbers of all

employees and members of the charitable organization who will be involved

in the management and supervision of charitable gaming. No fewer than two

(2) employees or members of the charitable organization who are involved in

the management and supervision of charitable gaming, along with the chief

executive officer or the director of the applicant organization, shall be

designated as chairpersons;

(h) The address of the location at which charitable gaming will be conducted and

the name and address of the owner of the property, if it is owned by a person

other than the charitable organization;

(i) A copy of the letter or other legal document issued by the Internal Revenue

Service to grant tax-exempt status;

(j) A statement signed by the presiding or other responsible officer of the

charitable organization attesting that the information submitted in the

application is true and correct and that the organization agrees to comply with

all applicable laws and administrative regulations regarding charitable

gaming;

(k) An agreement that the charitable organization's records may be released by

the Federal Internal Revenue Service to the office; and

(l) Any other information the office deems appropriate.

(14) (a) An organization or a group of individuals that does not meet the licensing

requirements of subsection (12) of this section may hold a raffle if:

1. The gross receipts do not exceed five hundred dollars ($500);

2. All proceeds from the raffle are distributed to a charitable organization;

and

3. The organization or group of individuals holds no more than three (3)

raffles each year;

and shall be exempt from complying with the notification, application, and

reporting requirements of subsections (2) and (13) of this section.

(b) An organization or a group of individuals that does not meet the licensing

requirements of subsection (12) of this section may hold a raffle if:

1. The organization holds a special event raffle license issued by the office

and complies with the regulatory requirements in this chapter, including

but not limited to the quarterly reporting requirements of KRS

238.550(7), the retention requirements of KRS 238.536, and payment of

the fee imposed by KRS 238.570;

2. The organization possesses a tax-exempt status under 26 U.S.C. sec.

501(c)(7);

3. The organization holds no more than twelve (12) raffles per year;

4. Each raffle complies with the office's raffle standards in KRS 238.545

and administrative regulations promulgated thereunder and is approved

by the office in writing prior to the sale of the first raffle ticket;

5. The gross receipts of each raffle do not exceed five hundred thousand

dollars ($500,000); and

6. One hundred percent (100%) of the net receipts of each raffle shall be

distributed to a charitable organization licensed by the office pursuant to

subsection (12) of this section to conduct charitable gaming as follows:

a. All distributed net receipts shall be maintained by the recipient

licensed charitable organization in a separate account to be

designated as the "raffle recipient account";

b. All distributed net receipts shall be expended by the recipient

licensed charitable organization to further the charitable purpose of

the recipient licensed charitable organization as required by KRS

238.550(4); and

c. All distributed net receipts, and the expenditure thereof, shall be

reported to the office and be subject to the office's auditing and

investigative authority consistent with the provisions of this

chapter.

(c) An applicant qualifying under paragraph (b) of this subsection shall submit an

application for a special event raffle license, and the information to be

submitted shall include but not be limited to the following:

1. The name and address of the organization;

2. The date of the organization's establishment in the Commonwealth of

Kentucky and the date of the organization's establishment in the county

or counties in which charitable gaming is to be conducted;

3. A statement of the purpose or purposes for which the organization was

organized and identification of the licensed charitable organization to

which the applicant will distribute its net receipts. If the organization is

incorporated, a copy of the articles of incorporation shall satisfy this

requirement;

4. A statement explaining the organizational structure and management of

the organization. For incorporated entities, a copy of the organization's

bylaws shall satisfy this requirement;

5. The names, addresses, dates of birth, and Social Security numbers of all

officers of the organization;

6. The names, addresses, dates of birth, and Social Security numbers of all

employees and members of the organization who will be involved in the

management and supervision of charitable gaming. No fewer than two

(2) employees or members of the organization who are involved in the

management and supervision of charitable gaming, along with the chief

executive officer or the director of the applicant organization, shall be

designated as chairpersons;

7. The address of the location at which charitable gaming will be

conducted and the name and address of the owner of the property, if it is

owned by a person other than the organization;

8. A copy of the letter or other legal document issued by the Internal

Revenue Service to grant tax-exempt status;

9. A statement signed by the presiding or other responsible officer of the

organization attesting that the information submitted in the application is

true and correct and that the organization agrees to comply with all

applicable laws and administrative regulations regarding charitable

gaming;

10. An agreement that the organization's records may be released by the

federal Internal Revenue Service to the office; and

11. Any other information as determined by the corporation through the

promulgation of administrative regulations.

(15) The office may issue a license for a specified period of time, based on the type of

charitable gaming involved and the desired duration of the activity.

(16) The office shall charge a fee for each license issued and renewed, not to exceed

three hundred dollars ($300). Specific fees to be charged may be prescribed in a

graduated scale promulgated by administrative regulations of the corporation and

based on type of license, type of charitable gaming, actual or projected gross

receipts, or other applicable factors, or combination of factors.

(17) (a) A licensed charitable organization may place its charitable gaming license in

escrow if:

1. The licensee notifies the office in writing that it desires to place its

license in escrow; and

2. The license is in good standing and the office has not initiated

disciplinary action against the licensee.

(b) During the escrow period, the licensee shall not engage in charitable gaming,

and the escrow period shall not be included in calculating the licensee's

retention rate under KRS 238.536.

(c) A charitable organization may apply for reinstatement of its active license and

the license shall be reinstated provided:

1. The charitable organization continues to qualify for licensure;

2. The charitable organization has not engaged in charitable gaming during

the escrow period; and

3. The charitable organization pays a reinstatement fee established by the

office.