The first giveaway took place last month in Cleveland, where recipients whose winning tickets were drawn from a bin landed cash gifts in increments of several hundred dollars, stuffed into envelopes. A second giveaway scheduled for this month in Virginia has been postponed, and more are said to be in the works…
The organizers say the events are run by the book and intended to promote economic development in inner cities. But the group behind the cash giveaways is registered as a 501(c)3 charitable organization. One leading legal expert on nonprofit law said the arrangement raises questions about the group’s tax-exempt status, because it does not appear to be vetting the recipients of its money for legitimate charitable need.
“Charities are required to spend their money on charitable and educational activities,” said Marcus Owens, a former director of the Exempt Organizations Division at the Internal Revenue Service who is now in private practice at the law firm Loeb & Loeb. “It’s not immediately clear to me how simply giving money away to people at an event is a charitable act.”
