On February 5, 1997, Congressman Jim Ramstad, a fourth term Republican from Minnesota introduced a bill to exempt all games of chance conducted by nonprofit organizations from Unrelated Business Income Tax (UBIT). Currently, only the proceeds of bingo games and other games conducted with substantially all the work performed by volunteers, are exempt from UBIT. The bill proposed by Congressmen Ramstad would extend this exemption by nonprofit organizations whether or not the work is performed by volunteers.

 The Bill, H.R. 620, has been referred to the committee on Ways and Means, of which Congressman Ramstad is a member. Hopefully, H.R. 620 will be approved by the Ways and Means Committee and incorporated into the 1997 tax bill.

 H.R. 620 is vitally important to nonprofit organizations engaged in bingo. Instant bingo, although considered bingo for purposes of UBIT exemption. The sale of instant bingo tickets (pull tabs, pickle cards, and instant raffles) is considered an unrelated trade or business by the IRS, a position that has been affirmed by the United States tax Court and the United States Court of Appeals for the 5th Circuit.

 The IRS has been grappling with the issue of UBIT and its applicability to instant bingo proceeds since at least the mid-1980s. On two occasions, May 16, 1990 and May 15, 1992, the IRS placed several cases in suspense until a final decision could be reached. On January 20, 1995, some relief wasgranted. In a memorandum issued by then Assistant Commissioner James McGovern, the IRS lifted the previous suspension and ordered all cases processed under a formula adopted in a Massachusetts Tax Court case. Essentially, the IRS concluded that tax-exempt organizations conducting charitable gambling could deduct as a business expense under Internal Revenue Code Section 162, all lawful purpose expenditures. According to the memorandum, those expenditures are amounts required under state law to be committed to so-called lawful purposes in order for the organization to retain its state gambling license. Although the availability of the Section 162 deduction has helped many nonprofit organizations reduce or eliminate their UBIT liability, the issue has not been resolved. The McGovern memorandum also indicated that despite the lifting of the suspension, NO FINAL DECISION on the issue has been reached. Thus, the position of the IRS could change, or worse, by reversed.

 Allied Charities of Minnesota, a trade association comprised of more than 900 nonprofit organizations engaged in charitable gaming in Minnesota, convinced Congressman Ramstad, as well as the entire Minnesota delegation in the House of Representatives, to sponsor H.R. 620. Additional sponsors are needed. Congress needs to hear that nonprofit organizations across the country support H.R. 620. YOUR HELP IS CRITICAL TO THE SUCCESS OF THIS BILL. Contact your Congressman or Congresswoman today and urge him or her to sign on to H.R. 620 and support its consideration in the Ways and Means Committee. If you need copies of H.R. 620 or other information, please contact the National Association of Fundraising Ticket Manufactures at (612)335-3590.