November 10, 2020 Vanessa Niragira
Hopefully, you’ve already read our previous blog Let’s Say No To Raffles, And Yes To Charity Sweepstakes, and if not take a look at that blog and come back over here.
By now you’ve made the decision to run a charity sweepstakes and we’re very pleased to not hear you say the word raffle! We’re going to share some information that you may not know you need to run said sweepstakes.
Your rules and regulations (also referred to as “terms and conditions”) outline the campaign as well as protect you and your entrants or donors. The official rules act as an agreement between the sponsor and entrant. Here is just some of the information that the rules must include:
How would I obtain this information? Of course, this is an easy answer if there is a cash prize or one of your products that has a set retail value. But what do you do if the prize doesn’t have an obvious monetary value, such as a meet and greet with a celebrity? This can be tricky but most organizations determine this by looking at how much it costs to purchase said meet and greet or the “street value”.
In the US, if the total ARV of your prize(s) is $5,000 or more then you’ll need to register your sweepstakes in the state of New York and Florida if you want residents of these states to be allowed to participate in the campaign. Additionally, these states require surety bonds to guarantee the sponsor will award the prizes.
In Canada, if you want residents from the province of Quebec to participate, you must follow the regulatory laws of the Régie des alcools, des courses et des jeux (the Régie). The Regie has filing and bonding requirements as well that vary depending on the prize value. For more details, see Registration and Bonding Requirements across North America.
Keep in mind that there are other registration, bonding, and tax requirements in various other countries, which can complicate things further if you’re looking to run an international sweepstakes.
To receive the funds raised from your charity sweepstakes campaign, your organization will need to set up or link a Stripe payment account which must be linked to the donation platform in advance of the sweepstakes launch. We can assist you with the process of setting up a Stripe account or other payment processing account.
Sweepstakes sponsors are responsible for providing an Affidavit of Eligibility and a
Liability and Publicity Release to the potential winner(s) as needed. The winner must complete the affidavit, declaring that they meet all eligibility requirements and to confirm that they agree to accept the prize as awarded.
The winner is responsible for completing and returning the affidavit within the deadline outlined in the Official Rules before being “confirmed” as a winner and awarded a prize.
The affidavit also gives the sponsor and other parties (such as the sponsor’s marketing agency) the right to use and publish the winner’s name, city, likeness, photo (etc.,) and other non-personal information in promotional materials related to the sweepstakes.
In addition, the affidavit releases the sponsor from any and all liability concerning claims related to any losses, damages, injuries, etc.
For a sweepstakes offering a trip or an experience in which the winner can bring a guest, the sponsor is also responsible for ensuring that they receive a completed guest release form prior to allowing the guest to accompany the winner on the trip/experience.
In the US, the IRS mandates that the value of a sweepstakes prize should be included in the
winner’s gross income if the value of the prize(s) is $600 or more. In this case, you would need to issue an IRS form 1099-MISC to the winner stating the Fair Market Value of the prize.
In Canada, contest or sweepstakes winners aren’t required to pay income taxes on prizes. For more information regarding tax requirements, see Do You Have to Pay Tax on Prizes?
Have questions about whether or not a charity sweepstakes is the right move for your brand? We’d love to hear from you!
Vanessa Niragira, Oakville, Ontario, November 2020