Charity sweepstakes: What you need to know
Thanks for considering RallyUp for your charity sweepstakes! Although sweepstakes are easy to run, there are a few requirements you’ll need to be familiar with before starting. This article provides an overview of those, and we’ve also included some recommendations that will help streamline the process of getting your campaign approved.
The Official Rules
Every sweepstakes has official rules that detail the terms of the campaign. This protects both you and your donors. RallyUp offers built-in official rules that will be customized for your campaign by having you answer a few questions. You’ll see these details at the bottom of your campaign page. They include:
- When the campaign officially ends (date and time)
- When the winners will be drawn (typically a date a few days after the entry deadline)
- The approximate retail value of the prizes (see below for more detail)
- A detailed description of the prize(s) you’re offering, including specifics of brand, size, color or other details.
If your prize includes a trip, please provide as much detail as possible about the travel arrangements. For instance, whether flights will be included and what costs the winner will be responsible for. Think of this as a contract with your winners: your objective should be to provide as much clear information as possible. A thorough description of your prize(s) will help to streamline the process of getting your campaign live.
Your sweepstakes rules will also describe an alternate method of entry (a free mail-in entry option), which is legally required.
The official rules are relatively standard and cover the requirements of most sweepstakes for US-based organizations. You should review the rules carefully to make sure your campaign remains in compliance with them. You can let us know if you'd like to make any changes to the rules before your sweepstakes goes live.
Please note that RallyUp’s built-in official rules can accommodate international drawings. If you would like to limit entries to specific territories, such as the U.S. and Canada exclusively, we can make this change for you. Simply email email@example.com to let us know whether you would like to include international participants in your sweepstakes, or limit the entries to specific countries. Please reach out to us with your preference either way, and include your campaign title or ID in your email.
You can also contact us to provide your own rules if you have specialized legal requirements. RallyUp does not provide legal advice or guidance, but we can work with your legal team to accommodate specific requirements. Please feel free to reach out to us for more information.
Approximate Retail Value (ARV)
The approximate retail value of your prize(s) is an important legal detail for your sweepstakes. Most organizations determine the ARV based on the cost to purchase the prize, or by using the "street" price. Some types of prizes, such as spending time with a celebrity, may not have an ARV, since these prizes are unique to the campaign and can’t be purchased.
If the prize is cash or if there is an option for the winner(s) to choose cash instead of the prize, then the actual cash value should be listed as the ARV.
Registration and Bonding
If the total ARV of your prize(s) is over $5,000, then you’ll need to register and bond your sweepstakes in the state of New York if you want its residents to be able to participate. The process of registering and acquiring a surety bond is simple, but can take up to two weeks depending on the state's application volume. You’ll need to have your campaign set up completely prior to acquiring the bond. Please note that no changes can be made to the campaign once the bond has been obtained.
RallyUp will provide you with all of the information needed to navigate the registration and bonding process in New York. We will introduce you to our partner who can help you acquire the bond. Should you wish to forego this step, the alternative is to exclude residents of New York from your sweepstakes, which can be added to the official rules.
The cost of registering a charity sweepstakes in New York is $100 (plus express shipping fees) and the cost of a surety bond is 2% of the value of the prize(s) (plus express shipping fees). Please contact us if you need registration and bonding, or if you want to exclude New York residents from your campaign.
To receive the funds you raise for your campaign, your organization will need to set up or link a Stripe payment account. We’ve compiled the simple steps you can take to set up direct funding in this short article.
Advertising and Promotion
If you plan on promoting your sweepstakes via social media, radio, television or other channels, be sure to check with each media source to ensure that you comply with their guidelines for these campaigns. For instance, you may be required to include certain language in your postings (such as “no purchase necessary”).
To view examples of these disclosure requirements for different promotional methods, see the article on promoting your charity sweepstakes.
Sweepstakes sponsors are responsible for providing an Affidavit of Eligibility and a Liability and Publicity release to the potential winner(s) as needed. The Affidavit of Eligibility declares that a winner is legally eligible to win. The winner is responsible for returning the affidavit before receiving the prize(s).
The Liability and Publicity release gives the sponsor and other parties (like the sponsor’s marketing agency) the right to use and publish the winner’s name and other non-personal information in promotional materials related to the sweepstakes. This document also releases the sponsor from liability concerning taxes or claims related to the sweepstakes winner. For a sweepstakes that offers trips on which the winner can bring a guest, the sponsor is also responsible for supplying the winner with a guest release.
These documents can be found online, but we’ve also included templates below that you can use for your campaign if desired. You’ll want to customize these templates before sending them, and then contact the winner(s) to find out the best way to provide them the documents for signature.
The IRS mandates that the value of a sweepstakes prize should be included in the winner’s gross income. If the value of the prize(s) is $600 or more, your organization will need to issue a Form 1099 to the winner. You can download a 1099 form here: Form 1099.
The information provided on the 1099 Form will include the sponsor’s name, address, tax ID, the value of the prize, the winner’s name, address, and social security number. The amount of tax that the winner must pay on the prize is determined based on their income and the tax bracket they fall into.
Please feel free to get in touch with us if you have questions about running a sweepstakes or need help with specialized requirements. We’re happy to help! You can reach us any time at firstname.lastname@example.org.