Charitable Bingo Regulations for Nonprofits: Licensing and Federal Tax

Charitable bingo regulations for nonprofits work on two tracks at once: a state gaming license that governs how you run the games, and federal tax rules that govern how you report the money. Get either wrong and the consequences are real, from fines to license revocation to turning otherwise tax-free bingo revenue into taxable income. The rules tightened in one meaningful way for 2026: the IRS raised the Form W-2G reporting threshold for bingo winnings to $2,000, so any organization operating on the old $1,200 figure needs to update its payout procedures.1Internal Revenue Service. Internal Revenue Bulletin 2026-19

Which Organizations Qualify

To run bingo legally, a group generally must hold tax-exempt status under 26 U.S.C. § 501(c). The categories that most commonly qualify are religious organizations, educational foundations, veterans’ posts, and fraternal societies.2Office of the Law Revision Counsel. 26 USC 501 – Exemption from Tax on Corporations, Certain Trusts, Etc. Civic leagues organized under § 501(c)(4) and volunteer fire departments also qualify in many jurisdictions.

Federal status alone is not enough. Most states require the organization to have been actively operating for a minimum period—commonly two to three years of continuous existence—before it can apply for a gaming license. Applicants document that history through meeting minutes, prior tax filings, or incorporation records. The waiting period exists to screen out groups that form solely to run gambling operations, so a newly incorporated nonprofit should expect to wait.

The organization’s primary purpose also has to be genuinely charitable, educational, religious, or community-focused. A social club that exists mainly for member entertainment has a harder time qualifying than a veterans’ post running community programs. Regulators look at the full picture of activities, not just the IRS determination letter.

Getting the State License

Before hosting a single game, a nonprofit needs a license from its state regulator, typically the attorney general’s office, a gaming commission, or a department of revenue. The application is more invasive than most nonprofits expect. At minimum, be ready to provide:

  • The Federal Employer Identification Number and IRS determination letter.
  • Names, addresses, and identifying details for all officers and board members.
  • A designated bingo chairperson who serves as the primary point of accountability.
  • The exact physical address where games will take place, plus any lease agreement.
  • Fingerprinting or criminal history screening for officers and key personnel.

Some states also require the application to identify every person with a financial interest in the gaming operation. That disclosure helps regulators screen out applicants with gambling-related convictions or a history of financial crimes. Providing false information on any part of the application can result in criminal charges.

Licensing fees vary from under $50 in some states to several thousand dollars in others, depending on anticipated volume of play and permit duration. Most licenses run one year and require annual renewal. Administrative review typically takes 30 to 60 days after submission, and missing documentation pauses the clock until the organization responds. Once approved, the license must be posted prominently at the game site before the first session.

How Games Have to Be Run

State gaming laws impose detailed operational rules. Specifics vary, but several requirements appear across nearly every jurisdiction.

Volunteer Staffing

Games must be run by members of the licensed organization, and those members cannot receive wages, profit-sharing, or any other compensation. This is the single most enforced rule in charitable bingo. Paying someone to call numbers, sell cards, or manage the floor—even indirectly through gift cards or inflated expense reimbursements—is treated as a serious violation in virtually every state. A few states allow limited paid staff in support roles, but the presumption is that bingo is a volunteer operation.

Age and Public Access

Players must typically be at least 18. Some states allow minors to attend with a parent or guardian but not to purchase cards or collect prizes. Games must also be open to the general public. Restricting attendance to organization members only is either prohibited outright or requires a separate, more restrictive permit.

Prize Caps

Every state caps prize amounts to keep charitable bingo distinct from commercial casino gambling. Per-game limits might run from a few hundred dollars up to $5,000, and per-session caps reach $15,000 in some states. Check the state’s specific rules before setting prize amounts, because exceeding the cap—even by a small margin—can trigger enforcement action and put the license at risk.

Equipment

Many states require bingo supplies (paper cards, pull-tabs, electronic card-minding devices) to be purchased only from distributors licensed by the state gaming authority. Using unapproved supplies can void a session’s results. Handheld electronic devices that help players track multiple cards are increasingly common; most states that permit them restrict the number of cards per device and require each device to be approved before use. A handful of states still prohibit electronic aids entirely.

Federal Tax Treatment

The federal side of charitable bingo is more favorable than many organizations realize, but only if the state-law side stays clean.

No Unrelated Business Income Tax

Under 26 U.S.C. § 513(f), bingo revenue is excluded from unrelated business taxable income as long as three conditions are met: the game is played in the traditional format where all wagers, winner selection, and prize distribution happen in the presence of every participant; the game is not the kind of activity ordinarily carried out on a commercial basis; and the game doesn’t violate state or local law.3Office of the Law Revision Counsel. 26 USC 513 – Unrelated Trade or Business A church or veterans’ post running lawful bingo won’t owe federal income tax on the proceeds. Lose the state license or run games that violate local regulations, though, and the exclusion evaporates, turning every dollar of bingo revenue into taxable income.

No Federal Wagering Excise Tax

Traditional bingo also avoids the federal wagering excise tax. Because the game is played in the presence of all participants, it falls outside the tax code’s definition of a lottery.4Internal Revenue Service. Update on Excise Tax and Occupational Tax on Wagering Organizations running standard bingo don’t need to file Form 11-C or pay the occupational tax on wagering. Instant bingo and pull-tab games played outside the traditional format may not qualify, so evaluate those separately.

Schedule G on Form 990

If gross gaming revenue exceeds $15,000 in the tax year, the organization must complete Schedule G (Form 990).5Internal Revenue Service. Instructions for Schedule G (Form 990) The form requires a detailed breakdown of gross revenue, cash and noncash prizes, rent, labor costs, and other direct expenses. Filers also report whether substantially all work was performed by volunteers, list every state where gaming was conducted, and confirm whether the state requires mandatory charitable distributions from gaming proceeds. All bingo goes in column (a); all pull-tabs in column (b).

Reporting Winners’ Prizes

Starting in 2026, any bingo prize of $2,000 or more requires the organization to file Form W-2G with the IRS.1Internal Revenue Service. Internal Revenue Bulletin 2026-19 All winnings from all cards played during one bingo game are combined when measuring against the threshold. You can’t split them across cards to stay under.

Before paying out a reportable prize, collect the winner’s name, address, and taxpayer identification number. The winner should present two forms of identification, at least one with a photo, so the ID numbers can be recorded on the W-2G. A driver’s license, passport, Social Security card, military ID, or completed Form W-9 all qualify.6Internal Revenue Service. Instructions for Forms W-2G and 5754

If a winner refuses to provide a TIN, the organization must apply backup withholding at 24% of the prize amount.6Internal Revenue Service. Instructions for Forms W-2G and 5754 Bingo is different from most gambling here: winnings are exempt from mandatory federal withholding under 26 U.S.C. § 3402(q), so the organization doesn’t automatically withhold from every large prize.7Office of the Law Revision Counsel. 26 USC 3402 – Income Tax Collected at Source The winner remains responsible for reporting and paying income tax on the prize. The organization’s job is to file the W-2G accurately and keep copies. The IRS matches W-2Gs against winners’ returns, and discrepancies bring scrutiny to both sides.

Handling the Money and Keeping Records

Every dollar from card sales, pull-tabs, and entry fees must go into a dedicated bingo account, completely separate from the organization’s general operating fund. Regulators use that separation to verify at any point that gaming revenue is reaching its intended charitable purpose rather than subsidizing unrelated overhead or moving into personal accounts.

Withdrawals from the bingo account are typically restricted to three uses: paying prizes, covering direct gaming expenses like rent and supplies, and funding the organization’s stated charitable mission. Using proceeds for anything else invites enforcement action.

Most states require quarterly or annual financial reports accounting for every dollar received and spent, and demonstrating that net proceeds went to the charitable purposes described in the original license application. Fines for late or inaccurate filings can reach several thousand dollars, and repeated failures can lead to permanent disqualification from future gaming permits.

Plan to retain all bingo-related financial records—deposit slips, bank statements, invoices, cancelled checks, and copies of every W-2G filed—for at least four years. States set their own minimum retention periods, and the IRS expects exempt organizations to maintain records sufficient to demonstrate ongoing compliance. When in doubt, keep records longer rather than shorter.

Violations That Cost Nonprofits Their License

Regulators take these violations seriously, and each one has ended gaming programs:

  • Compensating anyone for running games, including disguised payments like excessive “expense reimbursements” that don’t correspond to actual costs.
  • Depositing bingo revenue into the general checking account. Commingling creates a presumption that funds were misused.
  • Missing or late financial reports. Even one missed deadline can trigger a suspension.
  • Exceeding the state’s prize cap, even once.
  • Failing to file W-2Gs on prizes that meet the $2,000 threshold, which exposes the organization to IRS penalties and to backup withholding liability it will owe out of its own pocket.1Internal Revenue Service. Internal Revenue Bulletin 2026-19
  • Operating on a lapsed license. Once the license expires, the games are illegal gambling, which can carry criminal penalties for officers.

Designate one person to own compliance, keep a calendar of filing deadlines, and build the W-2G process into the prize payout procedure before the first game night.