IRS Publication 3079 – In the world of nonprofits, gaming activities like bingo, raffles, and poker nights are popular ways to raise funds and engage communities. However, these activities come with specific tax implications that can affect an organization’s exempt status. IRS Publication 3079, titled “Tax-Exempt Organizations and Gaming,” serves as a comprehensive resource to help nonprofits navigate these rules without jeopardizing their tax-exempt status or facing unexpected liabilities. Released in October 2018 and still the current version as of 2026, this publication outlines key requirements for various types of exempt organizations under the Internal Revenue Code (IRC).
This SEO-optimized guide breaks down the essentials of Publication 3079, drawing from official IRS sources and expert explanations. Whether you’re a 501(c)(3) charity or a 501(c)(7) social club, understanding these guidelines is crucial for compliance.
What Is IRS Publication 3079 and Why Does It Matter?
IRS Publication 3079 provides detailed guidance for tax-exempt organizations engaging in gaming, defined as activities like bingo, pull-tabs, raffles, and slot machines. It emphasizes that while gaming can support fundraising, it often doesn’t directly further exempt purposes and may trigger taxes or reporting obligations.
For nonprofits, non-compliance can lead to loss of exempt status, unrelated business income tax (UBIT), excise taxes, or penalties. The publication covers everything from maintaining records to withholding taxes on winnings, making it essential for boards, managers, and volunteers involved in charitable gaming. State laws may also apply, but Publication 3079 focuses on federal requirements—always check local regulations for licensing.
Chapter 1: Gaming’s Impact on Tax-Exempt Status
Gaming activities must align with an organization’s exempt purpose to avoid risking its status. The IRS evaluates based on the IRC section under which the organization is exempt.
- 501(c)(3) Organizations (Charities, Schools, Churches): Gaming is typically seen as recreational or business-like, not charitable. It must be insubstantial to prevent private inurement or classification as a private foundation.
- 501(c)(4) Social Welfare Groups: Limited gaming may be allowed if it supports welfare, but primary gaming activities can jeopardize exemption.
- 501(c)(7) Social Clubs: Gaming with members and guests can further social purposes, but public gaming exceeding 35% of gross receipts (with over 15% from non-members) risks status.
- 501(c)(19) Veterans’ Organizations: Member-focused gaming is permissible, but public gaming as a primary activity is not.
There’s no strict threshold; the IRS considers facts like resources devoted to gaming. Private inurement—net earnings benefiting individuals— is strictly prohibited.
Chapter 2: Gaming and Unrelated Business Income Tax (UBIT)
If gaming is a trade or business, regularly carried on, and not substantially related to exempt purposes, it generates UBIT. Report on Form 990-T if gross unrelated business income (UBI) is $1,000 or more.
Key exceptions where UBIT doesn’t apply:
- Bingo Exclusion: Applies if the game meets IRC definitions (e.g., played in person with cards and markers), is legal locally, and not regularly conducted by for-profits. Excludes online or pull-tab games.
- Volunteer Labor: If at least 85% of work is unpaid volunteers.
- Qualified Public Entertainment: For certain fairs or expositions under state law.
- North Dakota Games: Specific state exemption.
For social clubs, non-member gaming income is taxable. Use the flowchart in Exhibit A of Publication 3079 to determine UBIT.
Chapter 3: Recordkeeping Requirements for Nonprofit Gaming
Maintain business-like records, including journals, ledgers, and source documents, for at least 3-4 years. For gaming, track gross receipts, prizes, and expenses.
Implement internal controls like segregating duties (e.g., separate cashiers and managers) to prevent fraud. State-specific rules may require more stringent measures.
Chapter 4: Reporting Requirements for Tax-Exempt Organizations
Most exempt organizations file Form 990, 990-EZ, or 990-N annually. If gaming revenue meets thresholds, attach Schedule G to detail activities, including gross revenue, prizes, expenses, and charitable distributions.
Due May 15 for calendar-year filers; extend with Form 8868. Make returns available for public inspection.
Chapter 5: Workers in Gaming Activities – Employees vs. Contractors
Classify workers correctly: Employees if under control; independent contractors if focused on results. Volunteers must remain unpaid to qualify for exceptions.
For employees:
- Withhold income taxes (Form W-4).
- Pay FICA and FUTA (if applicable).
- File Forms 941/944 quarterly, 940 annually.
- Report tips over $20/month.
For contractors: Use Form W-9 for TIN; report on 1099-NEC if over $600.
Chapter 6: Reporting Winnings and Withholding Taxes
Issue Form W-2G for winnings over certain thresholds (e.g., $600 if 300 times the wager; $1,200 for bingo). Withhold 24% federal income tax on proceeds over $5,000 for most games.
For nonresident aliens, withhold 30%. File Form 945 annually for withheld taxes.
Chapter 7: Gaming Excise Taxes
If accepting wagers:
- Wagering Tax: 0.25% on legal wagers; 2% on illegal. File Form 730 monthly.
- Occupational Tax: $50/year for legal; $500 for illegal. File Form 11-C.
Exemptions include bingo and certain lotteries.
Tax Calendar for Gaming Organizations (Calendar Year)
Use this table for key deadlines:
| Date | Obligation |
|---|---|
| Jan 31 | File W-2/W-3, 1099-NEC, W-2G, 945, 941 (Q4), 940, 730 (Dec) |
| Feb 28 | File 1099 paper forms, 730 (Jan) |
| Mar 31 | File electronic 1099/W-2G, 730 (Feb) |
| Apr 15 | UBIT estimated Q1 payment |
| May 15 | File 990/990-EZ/990-N, 990-T |
| Jul 1 | File Form 11-C (occupational tax) |
Adapted from Exhibit B in Publication 3079. Fiscal year filers adjust accordingly.
Key Forms and Resources from Exhibit C
Publication 3079 lists essential tools:
- Forms: 990 series, 990-T, W-2G, 730, 11-C, 941, 945.
- Publications: 557 (Tax-Exempt Status), 598 (UBIT), 15 (Employer’s Tax Guide), 531 (Reporting Tip Income).
- Resources: IRS Exempt Organizations hotline (877-829-5500), IRS.gov for updates.
For more, see the IRS Stay Exempt course on charitable gaming.
Ensuring Compliance: Tips for Nonprofits Engaging in Gaming
To avoid pitfalls, consult Publication 3079 early, classify activities correctly, and maintain robust records. Consider professional advice for complex setups, and remember: gaming proceeds may count as UBI even if used for exempt purposes. By following these guidelines, your organization can enjoy the benefits of gaming while staying tax-compliant.
For the full document, download IRS Publication 3079 from the official IRS website. Stay updated via the IRS Exempt Organizations Update newsletter.