N.D. Admin Code 99-01.3-14-01 - Restrictions and requirements

1. An organization may not accept, and a recipient or potential recipient of net proceeds may not give or offer to give, a payment, gift, service, loan, personal or real property, or other thing of material value, for disbursing or receiving net proceeds. However, a recipient or potential recipient of net proceeds that is an organization or group of people may initiate and transact a formal agreement with a donor organization to voluntarily provide a gaming or nongaming related service to the donor organization in exchange for receiving net proceeds; provided, the agreement is first approved by the attorney general or complies with guidelines prescribed by the attorney general. If the attorney general approves the service, the donor organization shall document the service by recording the location, names of volunteers, description of service, number of hours volunteered, and value of the service based on a reasonable hourly rate. The donor organization shall offset the value of these services against the amount of net proceeds disbursed to the recipient during a quarter by reporting the value of these services as an adjustment on a tax return.

2. A disbursement of net proceeds must be specific as to recipient and use. After an organization disburses net proceeds, it may not interfere with a recipient's control of the funds or attempt to own or influence the use or sale of personal or real property bought by or for a recipient of the funds.

3. Use of net proceeds for economic development or tourism programs may not directly benefit a member, employee, or board of directors' member of a donor or donee organization nor may this person have a financial interest in a funded economic development or tourism program.

4. No private athletic, social, hobby, trade, business, professional, or similar clubs or associations may receive net proceeds, unless the use of the funds complies with subsection 2 of North Dakota Century Code section 53-06.1-11.1 or section 99-01.3-14-02. An expense related directly or indirectly with gaming is not an eligible use.

5. Restrictions on fundraising activities are:

a. An organization or recipient may not use net proceeds for a fundraising activity that relates directly to the conduct of gaming, including purchase of equipment or consumable goods for a cafe for a site or for direct or indirect expenses and capital costs for a business involving material unrelated business income;

b. An organization may only use net proceeds for expenses related to fundraising activities if the gross receipts from the fundraising activity are deposited into the trust account and the net income of the fundraising activity is used for a specific recipient or purpose that qualifies as an eligible use of net proceeds;

c. If an organization conducts a qualifying fundraising event and deposits the event's gross receipts in or pays the expenses from other than its trust account, it may not disburse net proceeds to the recipient unless it transfers the net income from the event to its trust account and makes a proper adjustment on a tax return; and

d. If a civic and service, fraternal, or veterans' organization uses net proceeds to conduct a fundraising activity and the amount spent on expenses exceed the net income generated by the activity, it shall reimburse the trust account for the difference between the expense amount and the net income amount with nongaming funds and make a proper adjustment on the tax return.

6. The attorney general may require a recipient of net proceeds to document the use of the funds and reimburse a donor organization if the funds were used for an ineligible use.

7. Unless an organization has first received approval from the attorney general, it may not sell a gift certificate or other thing of value to a recipient of its net proceeds.

8. If a check for a disbursement of net proceeds is not cashed by a recipient within six months of the date of the check, an organization shall contact the recipient to cancel or cash the check. If a check is voided, an organization shall make a proper adjustment on a tax return. If a recipient of net proceeds cashes a check related to a disbursement of net proceeds but has not applied the amount toward the intended eligible use within six months of the date of the check, the organization may request the recipient to return the net proceeds.

9. An organization may only disburse net proceeds to a recipient provided the recipient first requests a donation in writing and provides a description of the intended use and amount requested and the request is signed and dated. This rule does not apply to an unsolicited donation of net proceeds or a disbursement of net proceeds by an organization to a program or service that qualifies as an eligible use and which is supported directly by the organization.

10. If an organization conducts or enables a nonprofit corporation, community or school club, or other similar entity to conduct a fundraising event at the organization's facility, the organization may not exchange the gross or net receipts of the fundraising event for net proceeds.

11. An organization may not disburse net proceeds to a recipient on the condition that the recipient hold a meal or banquet at the donor's facility.

12. No disbursement of net proceeds can be used for services or fees that do not qualify as an eligible use or for any gaming-related expense. No disbursement of net proceeds to a recipient can be designed to circumvent the allowable expense limits.

13. If an organization is involved in any of the following types of transactions, it shall deposit the net proceeds, income, or receipts directly into its trust account or, if it is exempt from having a trust account, deposit the net proceeds, income, or receipts in its gaming account, and make a proper adjustment on a tax return:

a. The organization receives net proceeds from another organization and the net proceeds have been designated for a specific eligible use which the recipient has paid for or will pay for with net proceeds, or the net proceeds have not been designated for a specific eligible use;

b. The gross receipts derived from fundraising activity according to subdivision b of subsection 5 of section 99-01.3-14-01;

c. The organization loans net proceeds and receives interest or repayment of principal, or both;

d. A recipient returns net proceeds to or reimburses the organization; or

e. The organization disburses net proceeds, which qualify as an eligible use, and receives back funds that are directly associated with the disbursements or receives back income that is directly derived from the disbursement of the net proceeds.

Notes

N.D. Admin Code 99-01.3-14-01

Effective May 1, 1998; amended effective July 1, 2000; July 1, 2002; July 1, 2010. Amended by Administrative Rules Supplement 2016-360, April 2016, effective 4/1/2016. Amended by Administrative Rules Supplement 369, July 2018, effective 7/1/2018.

General Authority: NDCC 53-06.1-01.1

Law Implemented: NDCC 53-06.1-01.1, 53-06.1-11