Administrative Services

File Code: ADM.GIFTRAFFLE.POL
Approval Date: 4/16/12
Approved By: President

Policy on Gifts, Contributions, Prizes, Promotional Items, and Raffles

Introduction

Expenses for gifts, contributions, prizes, promotional items, and raffles are allowable from University funds within the following guidelines. University funds are defined as all University accounts with the exception of Foundation accounts (accounts that begin with an 8) and agency accounts (accounts that begin with a 9)

  1. Gifts
    A gift is defined as something given voluntarily without an expectation of payment in return.
    1. Gifts to Students/Non-Employees
      The purchase of gifts for students/non-employees is prohibited from University funds except under the following circumstances:
      1. The gift is in the form of a plaque, trophy, sweatshirt, etc., and is inscribed with the name/initials of Western Illinois University, (the purchase of gift certificates is not allowed unless the purchase is from social funds or student activity funds); and
      2. The gift is to recognize the support or achievement of the student/non-employee; and
      3. The gift has a unit value less than or equal to $75 and is approved by the fiscal agent, or the gift has a unit value greater than $75 but less than or equal to $100 and is pre-approved by the President or respective vice president. Pre-approval by the President is required for any gift which has a unit value greater than $100.
    2. Gifts to Employees
      The purchase of gifts for employees is prohibited from University funds except under the following circumstances:
      1. The gift is in the form of a plaque, trophy, sweatshirt, etc., (cash gifts cannot be given to employees unless part of a compensation plan) and is inscribed with the name/initials of Western Illinois University, (the purchase of gift certificates is not allowed unless the purchase is from social funds or student activity funds); and
      2. The gift is to recognize the employee for years of service or for initial employment; and
      3. The gift has a unit value less than or equal to $75 and is approved by the fiscal agent, or the gift has a unit value greater than $75 but less than or equal to $100 and is pre-approved by the President or respective vice president. Pre-approval by the President is required for any gift which has a unit value greater than $100.
      OR
      1. The gift is in the form of a plaque, trophy, sweatshirt, etc., (cash gifts cannot be given to employees unless part of a compensation plan) and is inscribed with the name/initials of Western Illinois University, (the purchase of gift certificates is not allowed unless the purchase is from social funds or student activity funds); and
      2. The gift is to recognize the outstanding achievement of the employee; and
      3. The gift value is less than or equal to $100 and is pre-approved by the President or the respective vice president.

        The purchase of gifts with retail unit values greater than $100 is prohibited from University funds when used to recognize an employee for outstanding achievement.
  2. Contributions to Organizations
    Contributions to organizations (fund-raising groups, professional organizations, local service clubs, etc.), are prohibited from University funds except under the following circumstances:
    1. Non-Cash
      1. The contribution is in the form of a plaque, trophy, sweatshirt, etc., and is inscribed with the name/initials of Western Illinois University, (gift certificates are not allowed); and
      2. The contribution has a unit value less than or equal to $75 and is approved by the fiscal agent, or the contribution has a unit value over $75 but less than or equal to $150 and is pre-approved by the President or respective vice president.
        Non-cash contributions greater than $150 are prohibited from University funds.
    2. Cash
      1. The contribution is in accordance with the purpose of the account, is paid from award and grant (9000) funds; and
      2. The contribution is pre-approved by the President or the respective vice president.
  3. Prizes/Awards
    Prizes or awards can be defined as something given without an expectation of repayment for recognition for superior performance in a competition or contest. The purchase of prizes/awards is permissible from non-appropriated funds when the prize/award is given as the result of a contest or a random drawing for which chances do not have to be purchased (See Section VI “Raffles”). Purchases with a retail unit value less than or equal to $100 require fiscal agent approval. Prizes/awards with retail unit values of greater than $100 but less than or equal to $300 must have the pre-approval of the President or respective vice president.
    The purchase of prizes/awards with retail unit values greater than $300 is prohibited from University funds.
  4. Promotional Items
    Promotional items are items used to promote WIU, a retail operation, or an event and are given away free of charge to prospective consumers.
    1. Tangible Items, (cups, pencils, pens, sweatshirts, etc.)
      The purchase of tangible promotional items from University funds with retail unit values less than or equal to $100 is permissible with the approval of the President or respective vice president. The purchase of tangible promotional items with unit values greater than $100 is prohibited from University funds.
    2. Services (tickets, season passes, etc.)
      The promotion of an activity by giving away services is permissible from University funds with fiscal agent approval if the service has a retail value less than or equal to $100. Services with retail value greater than $100 require the approval of the President or respective vice president.
  5. Cards, Flowers, Fruit Baskets, etc.
    Cards, flowers, fruit baskets, etc. may only be reimbursed/purchased from non-appropriated funds with approval of the respective vice president.
  6. Raffles (Including Cash and Non-Cash Prizes)
    This policy applies to students, employees, and any other representatives who conduct raffles under the auspices of Western Illinois University (hereafter “University”) or the WIU Foundation (“Foundation”) or any raffle for which the University or Foundation receives the proceeds. This policy is intended to inform and does not constitute legal or tax advice. Individuals who win raffle prizes should consult with their attorneys or tax professionals for advice on personal circumstances.
    1. Overview
      1. According to 230 Illinois Compiled Statute (ILCS) 15, “The Raffles Act,” and 720 ILCS 5/28-2, a raffle is defined as a form of lottery in which:
        1. The player agrees to pay something of value for a chance, represented and differentiated by a number or by a combination of numbers or by some other medium, one or more of which chances is to be designated the winning chance;
        2. The winning chance is to be determined through a drawing or by some other method based on an element of chance by an act or set of acts on the part of persons conducting or connected with the lottery, except that the winning chance shall not be determined by the outcome of a publicly exhibited sporting contest."
      2. The Internal Revenue Services (IRS) requires federal income tax withholding and reporting for raffles conducted by tax-exempt organizations in certain circumstances described in detail below.
    2. Limits and Approval
      1. Raffles for which the prize (cash or non-cash) is expected to be valued at $100 or less require approval of the office of the Vice President for Administrative Services.
      2. Raffles for which the prize (cash or non-cash) is expected to be valued greater than $101 but less than or equal to $599 require approval of the appropriate Vice President.
      3. Raffles for which the prize (cash or non-cash) is expected to be valued at $600 or more require the approval of the President. For prizes $600 and above, the reporting requirements described in sections D, E, and F below may apply.
    3. Sponsoring Organization’s Obligations
      1. Regardless of the amount of the raffle prize (cash or non-cash), the organization conducting the raffle should notify the Office of the Vice President for Administrative Services (VPAS) of the intent to hold a raffle. This office can be reached by phone at 298-1800 or in Sherman Hall 200.
        1. Notice should be given to VPAS thirty days prior to the date of the raffle drawing.
        2. VPAS will issue a raffle registration form for completion.
        3. Upon receiving the completed form, VPAS will ensure proper Vice Presidential or Presidential approval based on the anticipated value of the raffle prize.
        4. If applicable, VPAS will also distribute the appropriate IRS forms to the contact of the sponsoring organization.
      2. Include the following statement in all marketing or promotional material regarding the raffle: “Winners will be responsible for all taxes associated with prizes.”
      3. At the time of the raffle drawing, before the winner receives his/her cash or non-cash prize, the sponsoring organization must ensure the following:
        1. The winner has provided his/her name, address, and social security number (SSN) or Individual Taxpayer Identification Number (ITIN). If the winner refuses to provide this information, an attempt should be made to collect this information by sending the winner a copy of Form W-9, “Request for Taxpayer Identification Number and Certification.”
        2. The winner has completed the appropriate Federal and State tax forms as described below;
        3. Once identifying information and forms are collected, they should be sent to the VPAS in Sherman Hall 200; and
        4. If applicable, the proper amount is withheld or collected from the winner prior to giving the prize.
    4. Reporting Raffle Prizes
      1. IRS Notice 1340 (March 2005) outlines requirements and examples associated with reporting raffle prizes.
      2. An exempt organization must report raffle prizes if:
        1. The amount paid, reduced by the wager (the amount paid for the chance to win a prize) is $600 or more; and
        2. The payout is at least 300 times the amount of the wager.

          Example: Susan purchased a $1 ticket for a raffle conducted by a University organization. On October 31, 2006, the drawing was held and Susan won $900. Since the amount won reduced by the wager is $899 ($900 - $1), and the payout is $900 times the wager, the University must file Form W-2G with the IRS and give a copy of the form to Susan.
      3. The person receiving raffle winnings must furnish the University a statement on Form 5754 made under penalties of perjury stating his or her identity and the identities of any others entitled to the winnings.
      4. The University will issue Form W-2G to the winner by January 31 in the year following the year of the raffle and will issue the same form to the IRS by the last day of February.
    5. Federal Income Tax Withholding on Raffle Prizes
      1. Tax must be withheld on individual raffle prizes exceeding $5,000. The current withholding rate is 25%, and the tax amount will be reported to the IRS on Form W-2G. If the University fails to withhold from the winner, it becomes liable for the tax.

        Example: John purchased a $1 ticket for a raffle conducted by the WIU Foundation. On October 31, 2006, the drawing was held and John won $6,000. Because the proceeds from the wager are greater than $5,000 ($6,000 prize less the $1 ticket cost), the Foundation must withhold $1,499.75 ($5,999 x 25%) from John’s winnings. If the Foundation fails to withhold $1,499.75 before distributing the prize, it is liable for the tax
      2. Backup withholding: If the winner fails to furnish a correct taxpayer identification number (social security number, individual taxpayer identification number, or employer identification number), the University is required to withhold 28% of the total proceeds.
      3. Non-cash Prizes: For non-cash prizes valued at $5,000 or greater, the winner must pay the University 25% of fair market value of the prize minus the amount of the wager.
        1. Fair Market Value can be defined as the amount for which the prize could have been sold at the time the raffle was conducted.
        2. Useful information on determining the fair market value of an item can be found in IRS Publication 561, “Determining the Value of Donated Property.”

          Example: Jason purchased a $1 ticket for a raffle conducted by a University sponsored organization. On October 31, 2006, the drawing was held and Jason won a car worth $10,000 (fair market value). Because the prize exceeds $5,000 and the fair market value of the car is $10,000, the tax on the fair market value of the prize is $2,499.75 [($10,000 minus the $1 ticket cost) x 25%]. Jason must pay $2,499.75 to the University for remittance to the IRS on his behalf.
    6. Illinois Department of Revenue (IDOR) Reporting and Withholding Requirements
      1. For raffle prizes valued at $1,000 or more (less the amount of the wager), the IDOR requires winners to complete IDOR Form IL-5754, “Statement by Person Receiving Gambling Winnings.” The completed form should be submitted to VPAS in Sherman Hall 200. This form is not filed with IDOR, but the University must retain a copy.
      2. If the raffle prize (less wager amount) is more than $1,000, but less than $5,000, and the winner is an Illinois resident, the University is required to withhold at the full rate of tax (no exemptions). The current full tax rate is 3%. Tax will be withheld before the prize is paid to the winner.
      3. If the raffle prize (less wager amount) is valued at $5,000 or more and the winner is an Illinois resident, the University is required to withhold tax. The winner is required to prepare From IL-W-4-G, “Gambling Withholding Exemption Certificate.” Tax will be withheld before the prize is paid to the winner. Completed tax forms can be submitted to VPAS in Sherman Hall 200. The University will keep a copy and will file a copy with the IDOR.
      4. Illinois income tax withholding is not required for nonresidents.
    7. The purchase of non-cash raffle prizes is permissible from non-appropriated funds. Purchases with a retail unit value less than or equal to $100 require fiscal agent approval. Prizes with retail unit values greater than $100 but less than or equal to $300 must have the pre-approval of the President or respective vice president. Prizes with retail unit values greater than $300 must have the pre-approval of the President.
    8. Auctions
      1. For tax purposes, an auction is not considered a raffle or gambling.
      2. For auctions, there are not the same tax reporting or withholding responsibilities as with raffles.
    9. Nonresident Aliens
      1. Raffles won by nonresident aliens are reported on Form 1042-S, “Foreign Person’s U.S. Source Income Subject to Withholding.”
      2. Regardless of the amount, winnings are subject to Federal income tax at a rate of 30%.
      3. Some nonresident aliens may be able to claim exemption from Federal income tax under a United States tax treaty if one exists with the country of citizenship of the nonresident alien. To take advantage of the tax treaty, the proper paperwork must be processed before the raffle prize is distributed. Form 1042-S will be filed with the IRS and a copy will be issued to the winner by March 15 of the following year.
    10. Helpful Resources
      1. Instructions for Forms W-2G and 5754 contain the most current withholding rates.
      2. Although rates have not been updated in the IRS Publication 3079, “Gaming Publication for Tax-Exempt Organizations,” this publication is a useful resources.
      3. IRS Tax Tip 2004-33 provides information pertaining to gambling income and expenses.
      4. The Illinois Withholding Tax Guide contains additional information for state taxation.
    11. Raffle Winnings Not Required to be Reported by the University or Foundation
      1. Even in situations where the University is not required to report winnings or collect taxes, recipients still need to report such payments on their individual income tax returns.
      2. Recipients should consult with their individual tax advisors regarding reporting requirements with respect to raffle winnings.

Questions regarding this policy can be directed to VPAS at 309/298-1800.