OFFICE Of THE ATTORNEY GENERAL, STATE OF TEXAS 

JOHN CORNYN 

May 11,1999 

The Honorable Carole Keeton Rylander 

Comptroller of Public Accounts 

P.O. Box 219 

Austin, Texas 78767-0219 

Opinion No. JC-0046 

Re: Authority of charitable organization to 

conduct raffle that offers prize valued in excess of 

$50,000, and related questions (RQ-0013) 

Dear Comptroller Rylander: 

In this opinion we construe portions of the Charitable Raffle Enabling Act, article 179f of 

the Revised Civil Statutes. As you know, the constitution requires the legislature to prohibit 

“lotteries and gift enterprises” in the state, except those expressly authorized by the constitution. 

TEX. CONST. art. III, 5 47(a). Prior to voter approval of a constitutional amendment in 1989, any 

raffle was a prohibited lottery, even a raffle for charity. See Tex. Att’y Gen. Op. Nos. JM-513 

(1986) at 2; O-6887 (1946) at 3-4. The constitution now allows the legislature by general law to 

permit a qualified religious society, qualified volunteer fire department, qualified volunteer 

emergency medical service, or qualified nonprofit organization to conduct a charitable raffle subject 

to the conditions imposed by law. TEX. CONST. art. III, § 47(d). All proceeds from the sale oftickets 

for the raffle must be spent for the charitable purposes of the organization. Id. The Charitable Raffle 

Enabling Act is the general law authorizing and regulating charitable raffles. 

Your questions are asked with respect to a specific organization, St. Jude Children’s Research 

Hospital. You inform us: 

St. Jude Children’s Research Hospital, a national institution registered as a 

Texas foreign non-profit, is a hospital which provides treatment for children 

with cancer and other catastrophic childhood diseases. The hospital, located 

in Tennessee, provides treatment to children without regard to race, religion, 

creed or ability to pay. ALSAUSt. Jude, the hospital’s fund-raising arm, 

pays all costs associated with treatment beyond those covered by insurance. 

Families who have no insurance are never asked to pay. The hospital 

conducts fundraising activities in Texas. More than 180 children from Texas 

have been treated at St. Jude, including 57 who are current patients. In 
The Honorable Carole Keeton Rylander - Page 2 (X-0046) 

addition, the hospital provides all its research and clinical care protocols 

nationwide, including to hospitals in Texas. 

Letter from Honorable Carole Keeton Rylander, Comptroller ofPublic Accounts, to Honorable John 

Comyn, Attorney General (Jan. 25, 1999) (on file with Opinion Committee) [hereinafter Rylandcr 

letter of l/25/99]. We do not determine in this opinion whether St. Jude is an organization qualified 

under the Act to conduct raffles. Rather, we answer your questions in order to guide those 

organizations who are qualified to do so. 

You first ask whether a qualified organization may raffle a prize valued in excess of $50,000. 

You tell us that St. Jude wishes to offer a finished home as a raffle prize. Section 3(g) of the 

Charitable Raffle Enabling Act provides, in relevant part: “[Tlhe value of a prize that is offered or 

awarded at the raffle and that is purchased by the organization or for which the organization provides 

any consideration may not exceed $50,000.” TEX. REV. CIV. STAT. ANN. art. 179f, 5 3(g) (Vernon 

Supp. 1999). We construe section 3(g) in accordance with its plain language, which we think in this 

case clearly indicates the intent of the legislature. See St. Luke’s Episcopal Hosp. v. Agbor, 952 

S.W.2d 503, 505 (Tex. 1997). A prize that is purchased by the organization or for which the 

organization provides any consideration may not have a value ofmore than $50,000. It follows that 

if a prize is donated to the organization, and the organization gives no consideration for the prize, 

its value may exceed $50,000. See Hearings on Tex. H.B. 240 & H.R.J. Res. 32 Before the House 

Comm. on State Affairs, 71st Leg., R.S. (Apr. 3, 1989) (tape available from House Video/Audio 

Services) (statement of Rep. T. Smith, bill sponsor) (“[IIf the prize to be awarded is purchased, it 

cannot exceed $25,000 [now $50,000]; however, if it is donated there’s no limit on the value of the 

prize.“). A qualified organization may raffle a prize valued in excess of $50,000, but only if the 

prize was not purchased by the organization and the organization gave no consideration for the prize. 

You next ask whether section 3(g) of the Act prohibits an organization from “helping fund 

a raffle prize worth in excess of $50,000 through donations received from other fund raising efforts, 

such as other raffles or donations from outside sources.” Rylander letter of l/25/99, at 2. Although 

it is not clear what you mean by “helping fund” a prize, we understand you to ask whether the 

$50,000 cap applies when an organization purchases a prize with raised funds. We believe that it 

does. The Act was intended to benefit charitable organizations that receive most, if not all, of their 

funds through donations. See Hearings on Tex. H.B. 240 & H.R.J. Res. 32 Before the House Comm. 

on State Affairs, 71st Leg., R.S. (Mar. 13,1989) (tape available from House Video/Audio Services). 

A construction of the Act that excludes prizes purchased with donated funds from the $50,000 cap 

would allow an exception to swallow the rule. Such a construction would also be inconsistent with 

the clear terms of the statute: a prize that is purchased by the organization or for which the 

organization provides any consideration may not have a value ofmore than $50,000. See TEX. REV. 

Crv. STAT. ANN. art. 179f, 3 3(g) (Vernon Supp. 1999). This is true even ifthe funds used to obtain 

the prize were donated to the organization. 
The Honorable Carole Keeton Rylander - Page 3 (X-0046) 

Finally, you ask whether the profits received from a raffle may be used to fund the ongoing 

raffle or future raffles. As required by the constitution, the Raffle Enabling Act provides: “All 

proceeds from the sale of tickets for the raffle must be spent for the charitable purposes of the 

organization.” Id. 5 3(d). “Charitable purposes” under the Act means: 

(A) benefiting needy or deserving persons in this state, indefinite in 

number, by enhancing their opportunity for religious or educational 

advancement, relieving them from disease, suffering, or distress, contributing 

to their physical well-being, assisting them in establishing themselves in life 

as worthy and useful citizens, or increasing their comprehension of and 

devotion to the principles on which this nation was founded and enhancing 

their loyalty to their government; or 

(B) initiating, performing, or fostering worthy public works in this 

state or enabling or furthering the erection or maintenance of public 

structures in this state. 

Id. 5 2(a)(2). We have said that whether funds are used for a charitable purpose under the Act is a 

question of fact. See Tex. Att’y Gen. Op. No. JM-1180 (1990) at 3. Accordingly, whether a 

particular use of funds is for a charitable purpose is a question we generally cannot answer in an 

opinion. 

Your question suggests that you would have this office conclude as a matter of law that a 

qualified nonprofit organization may use proceeds of a raffle for future fund-raising efforts. You 

suggest that because fund-raising helps the organization further its charitable purposes, proceeds 

used for fund-raising efforts are used for a charitable purpose under the Act. While we agree that 

fund-raising is an inherent part of almost any charitable effort, in our view the Act requires raffle 

proceeds to be used for the direct charitable purposes of the organization; that is, for the direct 

benefit of needy or deserving persons in this state or for initiating, performing, or fostering worthy 

public works. See TEX. REV. CIV. STAT. ANN. art. 179f, 5 2(a)(2) (Vernon Supp. 1999). 

We cannot conclude that fund-raising itself is a charitable purpose. Nor are we prepared to 

say that it may never be a charitable purpose. There may be certain organizations who do nothing 

but raise funds for other charitable organizations. We are not prepared to say whether, in such 

instances, mnd-raising is a charitable purpose under section 2 of the Act. When, as in the case of 

St. Jude Children’s Research Hospital, a nonprofit organization has an identified charitable purpose 

ofbenefitting needy or deserving persons other than fund-raising, we decline to expand the definition 

of charitable purpose to include fund-raising. Such an analysis, we believe, would mistake the 

means by which the charitable purpose is accomplished (fund-raising to support medical treatment) 

with the charitable purpose of the organization (providing medical treatment). In these 
The Honorable Carole Keeton Rylander - Page 4 (X-0046) 

circumstances, a qualified nonprofit organization may not use raffle proceeds for the cost of future 

fund-raising events. 

We do not think, however, that the Act precludes an organization from using a portion of a 

raffle’s gross proceeds to pay the expenses ofconducting the raffle generating those proceeds. Like 

the constitutional provision permitting charitable raffles, the constitutional provision permitting 

charitable bingo requires “all proceeds” of the bingo game to be spent for the charitable purposes 

ofthe sponsoring organization. TEX. CONST. art. III, § 47(b)(l). In Aerospace Optimist Club ofFort 

Worth v. Texas AlcoholicBeverage Commission, 886 S.W.2d 556 (Tex. App.-Austin 1994, no writ), 

the court considered whether bingo proceeds could be used for expenses other than those directly 

serving a charitable purpose. The court found the ordinary meaning of “proceeds” uncertain: it is 

defined as both “the total amount brought in” and “the net amount received after deduction of any 

discount or charges.” Id. at 559 (citing WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY 1807 

(1986)). Finding no clear evidence of the intent of the voters in adopting the provision, the court 

looked to the legislative interpretation of the term. The Bingo Enabling Act equated the 

constitutional phrase “all proceeds” with the term “net proceeds” by providing: “[tlhe net proceeds 

of any game of bingo and of any rental of premises for bingo shall be exclusively devoted to 

charitable purposes.” Id. at 560 (citing TEX. REV. CIV. STAT. ANN. art. 179d, 5 1 l(d) (Vernon Supp. 

1999)). “Net proceeds” was defined to mean gross receipts “after deducting the reasonable sums 

necessarily and actually expended for advertising, security, repairs to premises and equipment, bingo 

supplies and equipment.” Id. Recognizing the value of legislative construction in constitutional 

interpretation, the court held that “the phrase ‘all proceeds’ as used in the Bingo Amendment means 

net proceeds after payment of reasonable, incidental, and necessary expenses.” Id at 560-6 1. “Any 

other construction would be unreasonable. Nothing suggests that the drafters of the amendment or 

the voters intended bingo operators to seek outside sources of revenue in order to conduct bingo 

operations.” Id. at 561. 

We believe a court would apply the same construction given to the phrase “all proceeds” in 

the constitution’s bingo provision to the phrase “all proceeds” in the constitution’s charitable raffle 

provision. See L & M-Surco Mfg., Inc. v. Winn Tile Co., 580 S.W.2d 920, 926 (Tex. Civ. 

App.-Tyler 1979, writ dism’d w.o.j.) (“In construing a statutory word or phrase, the court may take 

into consideration the meaning of the same or similar language used elsewhere in the act or in 

another act of similar nature.“). Although the Charitable Raffle Enabling Act does not define “all 

proceeds,” and thus does not construe the term, the remainder ofthe court’s analysis ofthe charitable 

bingo provision in Aerospace applies to the charitable raffle provision. The meaning of the term 

“proceeds” remains unclear, we find no evidence of the voters’ understanding of the phrase, and we 

find no indication in the legislative history ofthe Act that the legislature intended the cost of rattles 

to be funded from outside sources. We therefore conclude that the phrase “all proceeds” as used in 

the constitution and the Charitable Raffle Enabling Act means net proceeds after payment of 

reasonable, incidental, and necessary expenses. Accordingly, an organization may use raffle 

proceeds to pay the reasonable, incidental, and necessary expenses of conducting the raffle from 

which the proceeds were raised. The net proceeds of the raffle must be spent for the charitable 

purposes of the organization. 
The Honorable Carole Keeton Rylander - Page 5 (X-0046) 

SUMMARY 

Under the Charitable RaMe Enabling Act, a qualified organization may 

raffle a prize valued in excess of $50,000 if the prize was not purchased by 

the organization and the organization gave no consideration for the prize. If 

an organization purchases a prize, the prize is subject to the $50,000 cap even 

if the funds used for the purchase were donated. An organization may use a 

portion of the gross raffle proceeds to pay the reasonable, incidental, and 

necessary expenses of conducting the raffle from which the proceeds were 

raised, but ordinarily no raffle proceeds may be used to fund subsequent 

raffles. The net proceeds of the raffle must be spent for the charitable 

purposes of the organization. 

JOkN COYNYN 

Attorney General of Texas 

ANDY TAYLOR 

First Assistant Attorney General 

CLARK KENT ERVIN 

Deputy Attorney General - General Counsel 

ELIZABETH ROBINSON 

Chair, Opinion Committee 

Prepared by Barbara Griffin 

Assistant Attorney General