Nonprofit Tax Compliance for Events: Disclosures, Gaming, and Filings

Nonprofit tax compliance for events comes down to a handful of federal duties that fire the moment you sell a ticket or accept a sponsorship: written acknowledgments for gifts of $250 or more, quid pro quo disclosures on payments over $75, careful handling of anything that looks like unrelated business income, W-2G reporting on qualifying gaming prizes, and a full accounting of the event on Schedule G when you file your annual Form 990. Miss enough of them for long enough and the IRS can revoke your exempt status automatically. Most of the rules trace back to the Internal Revenue Code’s requirements for organizations exempt under Section 501(c)(3), and they apply whether the event is a black-tie gala, a silent auction, a benefit concert, or a church raffle.

Written Acknowledgments for Donors

Any cash contribution of $250 or more requires a written acknowledgment from your organization before the donor can claim a deduction. A canceled check will not carry them across that threshold. The letter has to state the dollar amount, say whether the organization provided any goods or services in return, and give a good-faith estimate of the value of anything provided.¹ If the only benefit is an intangible religious one not sold commercially, the letter just has to say so.

Timing is part of the rule. The acknowledgment counts as contemporaneous only if the donor receives it before whichever comes first: the day they file their return for the year of the gift, or the filing deadline including extensions. Most nonprofits send these by January 31 following the event. You can combine all of a donor’s $250-plus gifts for the year into one letter, but sending nothing means the donor loses the deduction outright.

When someone donates property for a silent auction, the acknowledgment describes the item but does not put a value on it. Valuation is the donor’s job. Donors whose total noncash gifts for the year exceed $500 have to file Form 8283 with their personal return.² Your organization does not file that form, but knowing the rule helps you answer questions.

Quid Pro Quo Disclosures Above $75

A quid pro quo contribution is a payment that is partly a gift and partly a purchase. A $200 gala ticket with $60 of dinner and entertainment is the classic example. The donor’s deductible amount is $140, and federal law requires you to spell that out in writing on any payment above $75.³

The written disclosure has to do two things: tell the donor that only the amount exceeding the value of goods or services received is deductible, and provide a good-faith estimate of that value. That means researching fair market prices before the event. Dinner, open bar, entertainment, gift bags, and raffle entries all count. The estimate does not have to be exact, but it has to reflect a reasonable effort to determine what those items would cost the donor elsewhere.

Skipping the disclosure triggers a penalty of $10 per contribution, capped at $5,000 per fundraising event or mailing.⁴ The cap resets per event, so several fundraisers a year without proper receipts stack the exposure. A narrow exception applies where the only thing the donor receives is an intangible religious benefit not sold commercially.³

When Event Revenue Becomes Taxable

Not every dollar you raise is shielded by exempt status. The IRS looks at three things: is the activity a trade or business, is it regularly carried on, and is it substantially related to your charitable mission. When the activity is a business and is not related, the net income is unrelated business taxable income (UBTI) and is taxed at the 21 percent corporate rate.⁵⁶

Two statutory exceptions cover most standard fundraisers. The volunteer labor exception applies when substantially all the work is done without compensation. The donated merchandise exception lets you sell contributed items without triggering UBTI, so long as substantially all the merchandise was donated.⁷ A charity auction stocked with donated goods and staffed by volunteers hits both.

“Substantially all” is the statutory phrase, not a fixed percentage. The more paid staff and purchased inventory involved, the harder either exception gets to claim. Track volunteer hours against total labor and record the source of every item sold, and you can back the position up if the IRS asks. Any organization with $1,000 or more in gross unrelated business income during the year must file Form 990-T.⁸

Sponsorships vs. Advertising

Corporate sponsorships are excluded from UBTI when they qualify as “qualified sponsorship payments,” and the treatment turns on whether the sponsor gets an acknowledgment or an advertisement.⁹ Displaying a company name, logo, phone number, website, or neutral description of its products is an acknowledgment and is fine. Comparative language (“best pizza in town”), pricing, endorsements, or calls to purchase turn the message into advertising, and that portion of the sponsorship becomes potentially taxable.¹⁰

A few other structures also fail. Payments contingent on attendance figures, broadcast ratings, or similar exposure measures are not qualified sponsorship payments. Neither are payments for ad space in a regularly scheduled organization publication rather than event-specific materials. When a package bundles acknowledgment with real advertising or exclusive product-sales rights, allocate the payment and treat the advertising portion as potential UBTI. Benefits worth no more than 2 percent of the total payment are disregarded.¹⁰

Raffles, Bingo, and Other Gaming

Gaming brings its own reporting stack. Starting in 2026, the minimum threshold for reporting gambling winnings on Form W-2G is $2,000, adjusted annually for inflation.¹¹ That is a significant jump from the $600 figure that applied through 2025. The winnings also have to be at least 300 times the amount wagered. On a $10 raffle ticket, the W-2G obligation kicks in when the prize is worth $2,000 or more, and a $3,000 prize would also satisfy the 300x test.¹²

To file, you need the winner’s full name, address, and Social Security number. Collect it before handing over the prize. When a group shares a winning ticket, use Form 5754 to identify each person and their share, which then produces individual W-2G forms.¹³

Federal income tax withholding starts at a higher tier. On proceeds exceeding $5,000 from a raffle, sweepstakes, or lottery-style drawing, the organization must withhold 24 percent for federal income tax.¹⁴ Separately, if a winner does not provide a valid taxpayer identification number, backup withholding at 24 percent applies regardless of the prize amount.¹⁵ This is where gaming fundraisers get into trouble. Winners do not always want to hand over a Social Security number at a party, and the organization ends up with a withholding bill it did not budget for.

State Registration, Sales Tax, and Raffle Permits

Federal rules are only half the picture. Most states require nonprofits to register before soliciting charitable contributions from residents, and a ticketed event counts as solicitation.¹⁶ Fees, renewal deadlines, and exemption categories vary widely. Some states charge nothing; others charge several hundred dollars a year. Churches and small nonprofits below a revenue threshold are often exempt, but the exemption rarely applies automatically. You typically have to file for it.

Sales tax is the other common issue. Many jurisdictions require collection on merchandise sold at events, and some treat ticket sales the same way. Whether your organization qualifies for a sales tax exemption depends on state law, and the exemption usually requires a separate application and certificate. Keep copies on hand for vendors and venues. Where you do collect sales tax, remitting it is not optional; directors can face personal liability for unremitted sales tax in some states.

Raffles add another layer. Many states require a separate gaming or raffle permit with fees that typically run about $20 to $30. Some states ban charitable raffles outright or restrict them to specific types of organizations. Check your state gaming commission or attorney general’s office well before the event date.

Reporting the Event on Your Annual Return

Everything from your events feeds into Form 990. Schedule G is the attachment for fundraising events, gaming, and professional fundraising services.¹⁷ If combined fundraising event contributions and gross income top $15,000, Part II of Schedule G is required, and it wants a detailed breakdown of your two largest events by name, gross receipts, and direct expenses like venue rental, food, and entertainment.¹⁸

If you paid outside firms to manage fundraising, Part I applies when those expenses exceed $15,000. You list every professional fundraising agreement in effect during the year and identify the ten highest-paid individuals or entities that earned at least $5,000 each.¹⁷ Part I applies only to full Form 990 filers, not 990-EZ filers.

Form 990-T is separate. Organizations with $1,000 or more in gross unrelated business income during the year file it apart from the regular 990.⁸ Filing is worth considering even in a loss year because losses can be carried forward against future unrelated income. Form 990-T must be filed electronically for tax years ending December 2020 and later.¹⁹

Deadlines, Penalties, and Automatic Revocation

The 990 series and 990-T are filed electronically through an IRS-authorized e-file provider.²⁰ W-2G forms for gaming winnings go through the Filing Information Returns Electronically (FIRE) system. State sales tax returns use each state’s own portal.

Filing Form 990 late carries a penalty of $20 per day, capped at the lesser of $10,000 or 5 percent of gross receipts. Organizations with annual gross receipts over $1,000,000 face $100 per day, capped at $50,000.²¹ The statutory amounts are adjusted for inflation annually.

The worst outcome is not a fine. An organization that fails to file its annual return for three consecutive years loses tax-exempt status automatically, effective on the original due date of the third missed return.²² Once revoked, the organization owes federal income tax like any corporation and cannot receive tax-deductible contributions until it reapplies and gets a new determination letter. Reinstatement is possible but involves a fresh application and, for many organizations, significant professional fees.

Keep digital copies of every confirmation receipt, e-file acknowledgment, and submitted return. The IRS requires exempt organizations to maintain books and records sufficient to demonstrate compliance, and those records must be available for inspection.²³ Retain event-related records for at least three years after the filing deadline of the return they support, matching the general statute of limitations for IRS examinations.

1
Office of the Law Revision Counsel. 26 USC 170 – Charitable, Etc., Contributions and Gifts
2
Internal Revenue Service. About Form 8283, Noncash Charitable Contributions
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Office of the Law Revision Counsel. 26 US Code 6115 – Disclosure Related to Quid Pro Quo Contributions
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Office of the Law Revision Counsel. 26 USC 6714 – Failure to Meet Disclosure Requirements for Quid Pro Quo Contributions
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Office of the Law Revision Counsel. 26 USC 11 – Tax Imposed
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Office of the Law Revision Counsel. 26 US Code 511 – Imposition of Tax on Unrelated Business Income of Charitable, Etc., Organizations
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Office of the Law Revision Counsel. 26 USC 513 – Unrelated Trade or Business
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Internal Revenue Service. Instructions for Form 990-T (2025)
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Internal Revenue Service. Advertising or Qualified Sponsorship Payments?
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eCFR. 26 CFR 1.513-4 – Certain Sponsorship Not Unrelated Trade or Business
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Internal Revenue Service. Instructions for Forms W-2G and 5754 (Rev. January 2026)
12
Internal Revenue Service. Publication 1099 (2026), General Instructions for Certain Information Returns
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Internal Revenue Service. About Form 5754, Statement by Person(s) Receiving Gambling Winnings
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Office of the Law Revision Counsel. 26 US Code 3402 – Income Tax Collected at Source
15
Internal Revenue Service. Backup Withholding
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Internal Revenue Service. Charitable Solicitation – State Requirements
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Internal Revenue Service. Instructions for Schedule G (Form 990)
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Internal Revenue Service. Schedule G (Form 990) – Supplemental Information Regarding Fundraising or Gaming Activities
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Internal Revenue Service. E-File for Charities and Nonprofits
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Internal Revenue Service. Annual Filing and Forms
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Office of the Law Revision Counsel. 26 US Code 6652 – Failure to File Certain Information Returns, Registration Statements, Etc.
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Internal Revenue Service. Automatic Revocation of Exemption
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Internal Revenue Service. EO Operational Requirements – Recordkeeping Requirements for Exempt Organizations