Information Guide

Nebraska Lottery and Rafe Information Guide, July 22, 2021, Page 1

Information Guide

Overview

The Nebraska Lottery and Rafe Act governs lotteries which exceed $1,000 in gross

proceeds (ticket sales) and rafes which exceed $5,000 in gross proceeds. The

Nebraska Small Lottery and Rafe Act governs lotteries and rafes which do not exceed

the $1,000/$5,000 thresholds.

This guidance document is advisory in nature but is binding on the Nebraska Department of

Revenue (DOR) until amended. A guidance document does not include internal procedural

documents that only affect the internal operations of DOR and does not impose additional

requirements or penalties on regulated parties or include condential information or rules and

regulations made in accordance with the Administrative Procedure Act. If you believe that this

guidance document imposes additional requirements or penalties on regulated parties, you

may request a review of the document.

This guidance document may change with updated information or added examples. DOR

recommends you do not print this document. Instead, sign up for the subscription service at

revenue.nebraska.gov/gaming to get updates on your topics of interest.

Terms

Gross Proceeds. The gross proceeds are determined by multiplying the number of tickets sold or given

away by the selling price of a single ticket; you may not apply any discounts (such as 6 tickets for $5)

when determining the gross proceeds for tax reporting purposes.

Lottery. A ticket drawing or race of inanimate buoyant objects (such as a duck race) where the prizes are

primarily cash.

Online Lottery and Rafe. Allows an organization to sell lottery and/or rafe tickets through their website.

Rafe. A ticket drawing or race of inanimate buoyant objects (such as a duck race) where the prizes are

primarily merchandise. To qualify as a “rafe” at least 80 percent of the prizes (as determined by their fair

market value) must be merchandise.

Utilization of Funds Member. A member of the licensed organization who will be in charge of the lottery or

rafe. This person is also accountable for proper use of lottery/rafe monies.

Licensed Lotteries and Rafﬂes

Eligibility. To be eligible for a lottery/rafe license, an organization must be:

❖ Organized or incorporated in Nebraska as a nonprot organization or corporation and have tax

exempt status under Internal Revenue Code (IRC) § 501; or

❖ Be a volunteer re company or volunteer rst-aid, rescue, ambulance, or emergency squad.

9-140-1995 Rev. 7-2021 Supersedes 9-140-1995 Rev. 9-2020

Nebraska Lottery and Rafﬂe

July 2021

Nebraska Lottery and Rafe Information Guide, July 22, 2021, Page 2

In addition, the organization must have at least ten members, as dened in the organization’s articles of

incorporation or bylaws. A lottery/rafe license entitles the organization to conduct as many lotteries and

rafes exceeding the $1,000/$5,000 thresholds as the organization desires during the licensing period.

If the organization is located in, or plans to sell lottery or rafe tickets in the cities of Lincoln or Omaha,

or Lancaster or Douglas County, it may be required to obtain an additional local permit to conduct lottery

or rafe activity within these jurisdictions. There may also be a local lottery/rafe tax. The organization

should contact the appropriate city or county clerk in these jurisdictions to see if local permit or tax

obligations apply.

Applying for a License. To apply for a lottery/rafe license, an eligible organization must le with DOR,

a Nebraska Application for Bingo, Lottery, Rafe, or Lottery by Pickle Card, Form 50, and Supplemental

Questionnaire. The biennial license fee is $30. The two-year license expires on September 30th of either an

odd or even-numbered year, based upon the eligible organization’s exemption under

IRC § 501. License fees are due in full for the biennial licensing period; however, if a new application is

received by DOR and the license will become effective on or after October 1 of the second year

of the biennial licensing period, the license fee due will be one-half of the biennial fee.

Utilization Of Funds Member. An organization applying for a lottery/rafe license must also designate at

least one of its members to be licensed as the Utilization of Funds Member (UFM). The UFM is responsible

for all lottery/rafe activity conducted by the organization. This includes supervising and coordinating the

activity as well as ensuring that all laws, rules, and regulations are met by all individuals involved with the

lottery/rafe. The UFM is also responsible for all the money raised through the activity, and must ensure that

the prots from a licensed lottery/rafe are used for a lawful purpose. The individual applying for the license

must be an active and bona de member of the organization for at least one year in order to be eligible for

the license. If the one-year membership requirement imposes an undue hardship on the organization, DOR

may waive the requirement. Instructions for requesting a hardship waiver can be found on the application

form for the Nebraska Application for Utilization of Funds Member, Form 50H. More than one UFM may be

licensed if the organization desires. The biennial fee for a Utilization of Funds Member

license is $40.

Bank Account. The organization must establish a separate bank account at a nancial institution, to be

used exclusively for lottery/rafe activity. This includes all online ticket sales. The name and address

of the bank and the bank account number must be supplied on the application form at the time the

organization applies for a license.

Prizes, Expenses, and Age Restrictions. At least 65% of

the gross proceeds of each licensed lottery or

rafe must be awarded to participants in the form of prizes. The organization cannot use more than

10% of the gross proceeds to pay the allowable expenses of the lottery or rafe. All ticket purchasers

and participants must be at least 18 years of age. There are exceptions to these three requirements if

the organization has obtained a Special Permit.

Special Permit. A licensed organization may apply for a lottery/rafe Special Permit. The permit is valid

for one year and exempts the organization from the following three requirements:

❖ The 65% prize payout;

❖ The 10% expense limitation; and

❖ The 18 years of age participation restriction.

The Special Permit allows the organization to conduct one lottery and/or one rafe during the period. The

organization cannot begin selling lottery or rafe tickets before the beginning date of the Special Permit,

and the winners must be determined on or before the ending date of the Special Permit. The fee for a

Special Permit is $10.

Nebraska Lottery and Rafe Information Guide, July 22, 2021, Page 3

Ticket Requirements. Tickets for a licensed lottery or rafe must be constructed as a two-part ticket, with

a detachable stub. The tickets and the detachable stubs must each contain a unique sequential number.

Additionally, the tickets must contain, at a minimum, the following information:

❖ Name and state ID number of the licensed organization;

❖ Cost per ticket;

❖ Date on which winners will be determined; and

❖ A statement indicating whether or not the winner must be present when winners are determined.

See sample tickets on page 5 of this guide.

Winner Determination. The winners for a licensed lottery or rafe can be determined only by a random

drawing of the tickets, or by a race using inanimate, buoyant objects oated along, for example, a river or

canal. No other methods of winner selection are allowed.

Use of Prots. The prots from a licensed lottery or rafe must be used for a lawful purpose as dened in

the Nebraska Lottery and Rafe Act and regulations. For more information regarding lawful purpose use

of proceeds, please see Reg-35-401, Lawful Purpose.

Reporting and Tax. Lotteries exceeding $1,000 and rafes exceeding $5,000 are subject to a two percent

state tax on gross proceeds. The tax is due on or before September 30 of each year. Tax returns are

automatically sent to the licensed organization. The licensed organization is also required to le a Lottery/

Rafe Annual Report, Form35B, which is due by August15 of each year.

Online Lotteries and Rafﬂes

Online lotteries and rafes permit qualifying nonprot organizations to sell lottery and/or rafe tickets

through their website. Tickets may be purchased with cash, check, or debit card. Credit card purchases

are not authorized. If the proceeds from lottery/rafe ticket sales are initially processed through another

account in the name of your organization, it is required that all proceeds must be transferred into the

lottery/rafe bank account as soon as possible.

Ticket Requirements. Tickets for a licensed lottery or rafe must be constructed as a two-part ticket, with

a detachable stub. The tickets and detachable stub must each contain a unique sequential number and

be the same size, shape, and weight. For tickets sold electronically, the stubs must be detached, scanned,

and emailed to the purchaser. The tickets must be kept in a safe location until they are placed in the

receptacle for the drawing to determine thewinner.

Winner Determination. The winners for a licensed lottery or rafe can be determined only by a random

drawing of the physical tickets, or by a race using inanimate, buoyant objects oated along, for example, a

river or canal. No other methods of winner selection are allowed.

Small Lotteries and Rafﬂes

The Nebraska Small Lottery and Rafe Act permits qualifying nonprot organizations to conduct, without

a license, one small lottery per calendar month which does not exceed $1,000 in gross proceeds, and

an unlimited number of small rafes per month provided the total gross proceeds from all the rafes

combined do not exceed $5,000 per calendar month. It is important to understand that if you begin

conducting a lottery or rafe under the Nebraska Small Lottery and Rafe Act, you must stop selling

tickets when you reach the $1,000/$5,000 gross proceeds limits; you cannot upgrade a small lottery or

rafe to a licensed lottery or rafe once ticket sales have begun.

Eligibility. To be eligible to conduct small lotteries and rafes, an organization must: (1) be organized or

incorporated in Nebraska as a nonprot organization or corporation and have tax exempt status under

IRC § 501; or (2) be an organization whose major activities, exclusive of conducting any lottery or

rafe, are conducted for charitable or community betterment purposes. Additionally, to be eligible an

organization must also have its principal ofce located in Nebraska.

Nebraska Lottery and Rafe Information Guide, July 22, 2021, Page 4

Prizes, Expenses, and Age Restrictions. There is not a minimum prize payout requirement or maximum

expense limitation for small lotteries and rafes as there is for licensed lotteries and rafes, nor is there

an age restriction relative to selling tickets or participating in a small lottery or rafe.

Ticket Requirements and Winner Determination. Tickets for a small lottery or rafe need to be

sequentially numbered and be the same size, shape, and weight. Winners in a small lottery or rafe can

be determined by a random drawing of the tickets, or by a race using inanimate, buoyant objects oated

along a river, canal, or other waterway. No other methods of winner selection are allowed.

Use of Prots. The prots from a small lottery or rafe must be used for a charitable or community

betterment purpose as dened in the Nebraska Small Lottery and Rafe Act and regulations.

Calendar Lotteries and Duck Races

If your organization is interested in conducting a calendar lottery (which involves the awarding of daily,

weekly, or monthly prizes), duck race, or any other unique type of lottery or rafe involving the purchase

of an object, product, or admission to an event, please contact the Charitable Gaming Division for advice

and assistance in conducting the activity properly.

Nebraska Lottery and Rafe Information Guide, July 22, 2021, Page 5

revenue.nebraska.gov/gaming

877-564-1315 or 402-471-5937

Nebraska Department of Revenue, Charitable Gaming Division, PO Box 94855, Lincoln, NE 68509-4855

Option 2: Participants must be present at the drawing to win.

Option 1: Participants are not required to be present at the drawing to win.

These samples illustrate the information which is required to be listed on all licensed lottery or rafe tickets.

Tickets must be constructed with a detachable stub. In addition, please note that the use of the word

“donation” on a lottery or rafe ticket is not acceptable. The amount paid to purchase a lottery or rafe ticket

is not considered a tax deductible contribution.

Organization Name

State ID Number

$1.00

Date of Drawing

Name

Address

City

State

Phone

Price

124

Stub

Retained by Seller

Given to Purchaser

Matching Sequential Numbers