Did Maryland's 1982 law letting charities raffle off real estate override the usual county permit and licensing rules for raffles?

Plain-English summary

Governor Harry Hughes asked the Attorney General to review House Bill 1885, which would let a bona fide charitable organization raffle off real property it owned or could convey, up to two such raffles per calendar year. The Attorney General approved the bill for constitutionality and legal sufficiency but flagged several unintended consequences for the Governor's attention. The bill was written as a broad, freestanding grant of authority rather than a narrow fix to the existing raffle statutes, which meant it would let a charity hold a real-property raffle free of the county permits, fees, licensing conditions, and other local restrictions that governed ordinary raffles for merchandise or cash. The opinion also noted the bill's "bona fide charitable organization" language might be narrower than some sponsors expected, and cautioned that a homeowner could not use a conditional sale tied to raffle ticket sales to receive more than the property's fair market value without violating the requirement that the raffle benefit only the charity.

Currency note

This opinion was issued in 1982. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

This opinion reviewed House Bill 1885 as introduced in the 1982 Maryland General Assembly, which was signed into law on June 1, 1982, as Chapter 908, Laws of Maryland 1982, effective July 1, 1982. Maryland's gaming and raffle statutes, the Charitable Organizations Law, and the implementing regulations at COMAR have all had the opportunity to change substantially since 1982. Anyone researching current Maryland rules for charitable raffles of real property should look to the current statute and current COMAR regulations rather than this opinion's 1982 analysis of a since-amended bill.

Common questions

Did Maryland's real-property raffle law require charities to follow the same county permit and licensing rules as other raffles?
The opinion found that, as written, House Bill 1885 did not. It was drafted as a broad, independent grant of authority rather than a narrow addition to the existing raffle statutes, so a charity holding a real-property raffle in a given county would not be bound by that county's usual permit, fee, licensing, age-restriction, or other requirements that applied to raffles of merchandise or cash, unless the Secretary of State later adopted regulations imposing similar conditions.

Was every nonprofit group covered by the new law?
Not necessarily. The opinion noted the bill used the narrower term "bona fide charitable organization," while other raffle statutes in the same subtitle separately listed volunteer fire companies, fraternal organizations, veterans' organizations, and religious organizations alongside charitable organizations, suggesting the new law might not automatically cover those other types of groups unless the Secretary of State's regulations clarified the definition.

Could a homeowner sell a house to a charity for more than it was worth, conditioned on the charity raising enough money from raffle tickets?
The opinion cautioned against this. It explained that if a property owner received more than the property's true fair market value through a conditional sale tied to the charity's ability to sell a certain number of raffle chances, the owner would be "benefiting financially" from the raffle in a way that made the raffle no longer "for the exclusive benefit of the charitable organization," which the statute required.

Did the bill leave room to fix these concerns without going back to the legislature?
Yes. The opinion pointed out that the bill specifically authorized the Secretary of State to adopt regulations governing real-property raffles by charitable organizations, and suggested it would be appropriate for those regulations to address local licensing conditions, the definition of "bona fide charitable organization," and the scope of the exclusive-benefit requirement.

Background and statutory framework

House Bill 1885 was meant to overcome limits in Maryland's existing "Gaming" subtitle of Article 27, under which some raffle statutes (such as §257, applicable in Baltimore City and Baltimore County, and §255, applicable in roughly 16 counties) had been read by local authorities to authorize prizes only in "merchandise and cash," excluding real property. Rather than simply amending those provisions to add real property as an eligible prize, the bill created a new, freestanding §236 permitting any bona fide charitable organization to hold up to two real-property raffles per year "for the exclusive benefit of the charitable organization," without cross-referencing or incorporating the various county-specific conditions found elsewhere in the subtitle, such as permit and fee requirements, restrictions on professional assistance, minimum local-operation periods, age limits on participants, one-prize-per-raffle rules, or bans on Sunday raffles.

The opinion also flagged that new §236's use of "bona fide charitable organization," rather than the broader lists of eligible groups (volunteer fire companies, fraternal organizations, veterans' organizations, religious organizations) found in other raffle sections, might make the new law narrower in that respect than the sponsors intended, though it noted the bill's reference to the Secretary of State, who separately administered Maryland's Charitable Organizations Law, suggested the General Assembly might have intended that law's broader statutory definition of "charitable organization" to apply.

Finally, drawing on the general rule that exceptions to the gambling laws are narrowly construed, citing Clerk v. Chesapeake Beach Park and a 1969 AG opinion, the opinion cautioned that even though §236 lacked the more explicit anti-profit language found in other raffle sections, it should still be read to prohibit a property owner from using a conditional sale, tied to the charity's ability to sell enough raffle chances, to receive more than the property's fair market value, since doing so would mean the owner, not just the charity, was benefiting financially from the raffle. The opinion noted a similar, even more restrictive position taken by the Attorney General of Virginia on analogous facts, but declined to say Maryland law categorically barred all conditional sales, given the bill's own reference to organizations that merely had "the ability to convey title." The opinion closed by suggesting the Secretary of State use the bill's regulatory authority to address these open questions through regulations, which were later adopted at COMAR 01.02.07.

Citations

Statutes:

• House Bill 1885 (1982 Maryland General Assembly), new Article 27, §236
• Article 27, §257
• Article 27, §255
• Article 27, §251B
• Article 27, §254
• Article 27, §256
• Article 27, §258
• Article 27, §258A
• Article 27, §258B
• Article 27, §259
• Article 27, §248
• Article 27, §250A
• Article 27, §253
• Article 27, §261
• Article 27, §246
• Article 41, §103A(b)
• Chapter 908, Laws of Maryland 1982
• COMAR 01.02.07

Cases:

• Clerk v. Chesapeake Beach Park, 251 Md. 657, 667 (1968)

Source

• Landing page: https://oag.maryland.gov/resources-info/Pages/attorney-general%E2%80%99s-opinions.aspx
• Original PDF: https://oag.maryland.gov/resources-info/Documents/pdfs/Opinions/1982/Volume67_1982.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

Criminal Law—Gaming—Raffles—Real Property—Effect of Law Permitting Raffles of Real Property

May 25, 1982

The Honorable Harry Hughes
Governor

We have reviewed and approve for constitutionality and legal sufficiency House Bill 1885 (Raffles of Real Property). In doing so, however, we wish to point out certain ramifications of the bill that may have been unanticipated by its sponsors and the General Assembly.

I
Purpose of Bill

The obvious purpose of House Bill 1885, as indicated by its title, is to permit "any bona fide charitable organization in this State to conduct a raffle if the prize is real property under certain circumstances".

As passed, House Bill 1885 would add a new §236 to the subtitle "Gaming" in Article 27, to provide as follows:

"(a) This subtitle may not be construed to make it unlawful for any bona fide charitable organization in this State to conduct a raffle for the exclusive benefit of the charitable organization, where the prize awarded is real property to which the organization holds title, or as to which the organization has the ability to convey title. An organization may not conduct more than 2 raffles of real property in any calendar year.

(b) The Secretary of State may adopt regulations governing raffles of real property by charitable organizations under this section."

We assume that this new law was primarily intended to overcome certain limitations, contained in other sections of the same subtitle, that have been construed to prevent the holding of a raffle if the prize is real property. For example, §257 authorizes certain organizations in Baltimore City and Baltimore County to hold a "carnival, bazaar or raffle" and, "at such carnival, bazaar or raffle", to award "prizes ... in merchandise and cash". We understand that Baltimore City and Baltimore County authorities have read the statute's limited reference to "merchandise and cash" as excluding real property. Similar limiting language appears in other sections of the subtitle as well. See, e.g., §255, which applies to some 16 counties.

II
Exemption from Local Regulation

The language of House Bill 1885, however, is far broader than would be necessary to avoid just this one limitation. If the sole purpose of the new law were to override the limited references to "merchandise and cash", it would have been sufficient to word the new statute to provide, for example, that "a person or organization otherwise authorized to conduct a raffle under any provision of this subtitle may not be precluded from doing so merely because the prize to be offered is real property. ..."

Proposed §236, however, is not worded as an addendum to or modification of other existing authority. Rather, it is couched as a broad, unqualified and independent grant of authority to hold real property raffles, notwithstanding any of the prohibitions, limitations, conditions, or qualifications otherwise applicable to raffles conducted in this State.

As such, this section would permit a charitable organization to hold a raffle for real property in any county or counties, wholly free of the licensing or other restrictions that otherwise govern raffles in that county or counties. In various counties, for example, a raffle may be conducted only if one or more of the following conditions have been met:

(1) a permit is first obtained from and a fee paid to the county [e.g., §§251B, 254, 255(b), 256, 257, and 258];

(2) the raffle is conducted in accordance with regulations adopted by the county government [e.g., §§250A and 251B];

(3) the raffle is conducted without the assistance of professionals [e.g., §§251B, 253, 254, and 256];

(4) the charitable organization "spend[s] the greater part of [its] funds for . . . charitable purpose in" the political subdivision [e.g., §257];

(5) persons below a certain age do not participate in the raffle [e.g., §§255(b) and 256];

(6) the organization has operated in the county for a specified time [e.g., §256];

(7) no more than "one major prize" is offered per raffle [e.g., §258];

(8) the raffle is not conducted on a Sunday [e.g., §258(b)]; and

(9) the prize does not exceed a specified value [e.g., §§254(b)(3), 258B, and 259],1

In sum, then, the various conditions, limitations, and local oversight otherwise governing a charitable organization that, for example, holds a raffle for a television set would not apply if the same organization instead chose to raffle off real property. Whether this broad result was in fact intended by the General Assembly is uncertain. It is, however, the effect of House Bill 1885.

In this regard, however, §236 specifically authorizes the Secretary of State to adopt regulations "governing raffles of real property . . . under this section". In exercising that broad authority, it would appear possible for the Secretary of State to adopt regulations that require adherence to local licensing and similar requirements.

1 It is unclear whether these and similar county requirements apply only to those raffles actually held in the particular county or, also, to any raffle, even if held elsewhere, for which chances are sold in that county.

III
Meaning of "Bona Fide Charitable Organization"

We also note that, in at least one respect, House Bill 1885 may be somewhat narrower in scope than anticipated. Unlike the many other raffle sections appearing in the same subtitle, new §236 applies only to a "bona fide charitable organization". In the context of the "Gaming" subtitle of Article 27, the term "charitable organization" is generally used to describe something other than such entities as, for example, a volunteer fire company, a fraternal organization, a veterans' organization, or a religious organization. See, e.g., present §255, which refers to "any volunteer fire company or bona fide fraternal, civic, war veterans', religious or charitable organization or corporation".

Given the new statute's reference to the Secretary of State, who is also charged with administering the State's Charitable Organizations Law, it may be that the General Assembly intended that Law's broad statutory definition of "charitable organization" [Article 41, §103A(b)] to apply here as well. The General Assembly did not, however, express this intent anywhere in the statute itself.

Again, however, §236 specifically authorizes the Secretary of State to adopt regulations "governing raffles of real property by charitable organizations under this section". In exercising that authority, it would be appropriate for the Secretary of State to adopt specific regulations further defining the statutory reference to a "bona fide charitable organization in this State".

IV
Prohibition of Private Gain or Profit

Finally, we note that most of the existing sections authorizing raffles contain express limitations against any individuals' benefiting financially from the holding of the raffle. Thus, for example, present §255 authorizes a raffle only "for the exclusive benefit of [the] charitable organization . . . , if no individual or group of individuals benefits financially from the holding of . . . [the] raffle or receives or is paid any of the proceeds from . . . [the] raffle, for personal use or benefit". (See also, e.g., §§248, 250A, 251B, 253, 257, 258, 258A, and 261.) Proposed §236 contains the caveat that the raffle be "for the exclusive benefit of the charitable organization", but does not contain the additional clause quoted above.

The relevancy of such language is perhaps most apparent in the context of the following example: A homeowner agrees to sell his or her home to a charitable organization for a specified price, but that sale is conditioned on the organization's ability to sell a certain number of chances, or its receipt of a specified minimum amount of money, and the consequent holding of a raffle for that home.

Language such as that appearing in present §255 has been read by some State's Attorneys, correctly, we believe, to preclude such a conditional arrangement if the purchase price to be received by the homeowner from the charitable organization is anything greater than the current bona fide fair market value of the home, i.e., if the homeowner stands to receive anything in excess of the price that the owner would have been able to receive had the property been offered for sale on the open market. For example, if the fair market value of a home is $50,000 and a charitable organization nevertheless agrees to pay the homeowner $75,000 for the property, but only if it sells, say, $100,000-worth of tickets, the homeowner is obviously "benefit[ing] financially" and "receiv[ing] . . . proceeds" from the raffle in violation of the law.

Although greater specificity in §236 would be helpful, the general rule is that exceptions to the gambling laws, of which §236 would be one, are to be narrowly construed. See, e.g., Article 27, §246; Clerk v. Chesapeake Beach Park, 251 Md. 657, 667 (1968); 54 Opinions of the Attorney General 161 (1969). Consequently, we believe, even the more limited language of §236 can and should be read to prohibit such obvious subterfuges as those described above. That is, if a property owner obtains a special price or other benefit from the holding of the raffle, as distinct from a bona fide arm's length sales transaction between the owner and the charitable organization, the raffle arguably is not being held "for the exclusive benefit of the charitable organization".

We note that, based on statutory language even less express than that used here, the Attorney General of Virginia has ruled that any conditional sale of property to a charitable organization for use as a prize in a raffle, presumably, even if the property is sold to the organization at or below its fair market value, is prohibited by Virginia law. Opinion from Marshall Coleman, Attorney General, to Anthony P. Giorno, County Attorney (November 17, 1981), at note 2 and accompanying text.2 We would not go so far as to suggest that all conditional sales are similarly prohibited by Maryland law, particularly in light of the reference in House Bill 1885 to property "to which the organization holds title, or as to which the organization has the ability to convey title". The latter clause seems designed specifically to accommodate conditional sales.

Nevertheless, we do caution against transactions in which, pursuant to a conditional sales agreement, an option, or a similar arrangement that is dependent on the charitable organization's ability to sell enough chances to warrant the holding of the raffle, the property owner stands to receive something more than he or she would have received from any other willing buyer, i.e., something more than the then true fair market value of the property. (In cases of doubt, a current, independent appraisal of the property might be warranted.)

And, again, it might well be appropriate for the Secretary of State to adopt regulations under §236 to delineate more specifically the manner and extent to which a real property raffle must be "for the exclusive benefit of the charitable organization".

2 Ironically, Virginia is the state from which local interest in real property raffles first arose.

Stephen H. Sachs, Attorney General
Avery Aisenstark, Principal Counsel,
Opinions and Advice

Editor's Note: On June 1, 1982, House Bill 1885 was signed into law as Chapter 908, Laws of Maryland 1982, effective July 1, 1982. The preceding Opinion was originally written as a bill review letter; because of the special problems and issues noted, it is published here in a slightly revised format.

The regulations subsequently adopted by the Secretary of State to govern raffles of real property are now codified at COMAR 01.02.07.