Could a nonprofit use the Department's share of bingo-card-charge distributions to pay bingo expenses under RR 97-16?

Plain-English summary

South Carolina Revenue Ruling 97-16 said a nonprofit could not use the Department's distribution from bingo-card charges to pay the costs of running bingo, including promoter compensation.

Under the 1997 system described, the Department retained 16.5 cents per dollar of bingo-card face value, except for Class C licensees, and distributed 26 percent of that revenue to the sponsoring charity. That distribution had to be deposited in a separate account and kept apart from bingo proceeds.

Game expenses and promoter or employee compensation had to be paid from the bingo account. That account held proceeds derived from conducting bingo, after prizes and entrance-fee treatment described by the statutes. The Department-distributed money instead had to support charitable purposes or the purpose for which the nonprofit was established.

Common questions

Q: Could the charity pay its promoter from the Department distribution? No. The ruling required promoter compensation to come from the bingo account.

Q: Could the two pools of money be combined? No. The ruling quoted provisions requiring the Department distribution to be maintained separately and prohibiting commingling of bingo proceeds.

Q: What could checks from the bingo account cover? The quoted statute allowed necessary and reasonable game expenses, qualifying compensation, and distributions or transfers of net proceeds for charitable purposes.

Q: Are the 16.5-cent and 26-percent figures current? This page establishes only the figures stated in the 1997 ruling.

Citations and references

• S.C. Code Ann. § 12-21-4190 (bingo-card charge and sponsoring-charity distribution)
• S.C. Code Ann. §§ 12-21-4080 and 12-21-4090 (session proceeds, bingo accounts, expenses, and separation of funds)
• Bingo Act of 1996, effective October 1, 1997 (law described by the ruling)

Subject

Bingo Card Charges Distributed to the Nonprofit Organization

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/RR97-16.pdf

Original ruling text

State of South Carolina

Department of Revenue
301 Gervais Street, P. O. Box 125, Columbia, South Carolina 29214

SC REVENUE RULING # 97-16

SUBJECT:

Bingo Card Charges Distributed to the Nonprofit Organization

EFFECTIVE DATE:

Applies to all periods open under the statute.

SUPERSEDES:

All previous documents and any oral directives in conflict
herewith.

REFERENCES:

S. C. Code Ann. Section 12-21-4190 (Supp. 1996)
S. C. Code Ann. Section 12-21-4080 (Supp. 1996)
S. C. Code Ann. Section 12-21-4090 (Supp. 1996)

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (Supp. 1996)
SC Revenue Procedure #97-8

SCOPE:

A Revenue Ruling is the Department of Revenue's official
advisory opinion of how laws administered by the Department
are to be applied to a specific issue or a specific set of facts, and
is provided as guidance for all persons or a particular group. It is
valid and remains in effect until superseded or modified by a
change in the statute or regulations or a subsequent court
decision, Revenue Ruling or Revenue Procedure.

Question:
May money distributed by the department to the nonprofit organization under Code
Section 12-21-4190(1) be used to pay expenses (e.g. the promoter’s compensation)
incurred in the conduct of bingo?
Conclusion:
No.

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Facts:
Effective October 1, 1997, the General Assembly enacted the Bingo Act of 1996 which
adds Article 24, Chapter 21, Title 12 and repeals Article 23, Chapter 21, Title 12. The
Bingo Act of 1996 implements a wide variety of substantial changes to the bingo laws.
The main change concerns the purchase of bingo cards. The following is a brief
explanation of this aspect of the law:
1.

All bingo operators will be required to obtain their bingo cards by paying a tax to the
department. Upon application for the cards, the department will authorize a qualified
distributor to sell bingo cards to the bingo operator. The tax must be paid within 15
days of application for the cards.

2.

The department must collect 16.5 cents per dollar face value of the bingo cards
(except for Class C nonprofit organizations.) Twenty-six percent of this revenue
will be distributed to the nonprofit organizations, with the remainder distributed in
accordance with the statute for governmental purposes.

3.

The department will make distributions to the nonprofit organization (sponsoring
charity) from the tax received by the last day of the month following the month the
revenue was collected.

4.

The nonprofit organization, or the promoter conducting the games on its behalf, may
then use the bingo cards purchased from the distributor through this procedure to
conduct bingo games in order to raise money in accordance with the law.

Discussion:
The issue is whether a nonprofit organization can pay expenses of the bingo game from
money distributed by the department to the nonprofit organization under Code Section
12-21-4190(1).
Code Section 12-21-4190 concerns the payment of the tax to the Department, and reads:
The department shall charge and retain sixteen and one-half cents of the dollar
value for each bingo card sold except sales to Class C licensees pursuant to this
article. The revenue retained must be distributed as follows:
(1) twenty-six percent of the revenue must be distributed to the sponsoring
charity for which the bingo cards were purchased. The department shall
make the distribution to the sponsoring charity by the last day of the next
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month following the month the revenue was collected. Distributions under
this subsection must be reduced by any delinquent debts as defined in the
Setoff Debt Collection Act.
(2) seventy-four percent pursuant to Section 12-21-4200.
Code Section 12-21-4200 distributes the seventy-four percent discussed above among
various state agencies.
Code Sections 12-21-4080 and 12-21-4090 concern the procedures for accounting for the
funds received in conducting bingo games during a session. Code Section 12-21-4080
reads in part:
(A) Upon completion of the session, the promoter shall deliver to the
representative member of the organization the gross proceeds from the session
less the amount paid out as prizes and collected as entrance fees.
(B) The representative member of the nonprofit organization shall deposit the
funds into the bingo checking account or savings account as described in
Section 12-21-4090...
Code Section 12-21-4090 reads in part:
(A) The provisions of this section apply to the licensed nonprofit organization
which is responsible for the special checking and savings accounts established
by this section.
(B) The organization shall control all deposits, transfers, and disbursements
from these accounts, including the payment of compensation to the promoter
and employees of the promoter or organization working the bingo games.
(C) An organization receiving an annual license to conduct bingo shall
establish and maintain one regular checking account designated the “bingo
account” and also may maintain an interest-bearing savings account designated
the “bingo savings account.” All funds derived from the conduct of bingo, less
the amount awarded as cash prizes, must be deposited in the bingo account. No
other funds may be deposited in the bingo account. Deposits must be made no
later than the next business day following the day of the bingo occasion on
which the receipts were obtained. All accounts must be maintained in a
financial institution in this State.

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(E) Funds received by the nonprofit organization from the department as a
result of the sale of bingo cards must be deposited into a separate account and
maintained separately from bingo funds and the bingo account referenced in
this section.
(F) Checks drawn on the bingo account must be for one or more of the
following purposes:
(1) payment of necessary and reasonable bona fide expenses incurred and
paid in connection with the conduct of bingo;
(2) payment of necessary and reasonable compensation incurred and paid in
connection with the conduct of bingo for personnel and promoters managing
and conducting the game;
(3) disbursement of net proceeds derived from the conduct of bingo to
charitable purposes or the purpose for which the organization was
established;
(4) transfer of net proceeds derived from the conduct of bingo to the bingo
savings account pending disbursement to a charitable purpose.

(I) Gross proceeds derived from the conduct of bingo must not be commingled
with other funds of the licensed organization.

Based on the above, money distributed by the department to the nonprofit organization
under Code Section 12-21-4190(1) may not be used to pay expenses (e.g. the promoter=s
compensation) of the bingo games. The provisions of Code Section 12-21-4090 require
that all expenses of the bingo game must be controlled by the nonprofit organization from
the bingo account and that the money placed into this account, which is derived solely
from the conduct of bingo, may not be commingled with other funds of the nonprofit
organization, the promoter, an employee of the nonprofit organization or promoter, or any
other person or entity. Specifically, compensation for the promoter and employees of the
game must be paid from the bingo account. In addition, money derived from the conduct
of bingo must be kept separate from money distributed by the department to the nonprofit
organization under Code Section 12-21-4190(1). See subsections (B), (E) and (I).

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In summary, money distributed by the department to the nonprofit organization under
Code Section 12-21-4190(1) must be used by the nonprofit organization for charitable
purposes or the purpose for which the nonprofit organization was established.

SOUTH CAROLINA DEPARTMENT OF REVENUE

s/Burnet R. Maybank, III
Burnet R. Maybank, III, Director

Columbia, South Carolina
November 3
, 1997

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