The only legal expenditures of charitable gambling proceeds are expenditures that either meet the statutory definition of an allowable expense or the definition of a lawful purpose. The specific requirements and prohibitions for allowable expenses and lawful purpose expenditures are detailed and can be confusing even to experienced gambling managers. It's important that you carefully read the Allowable Expenses and Lawful Purpose Expenditures sections, and that you contact your organization's compliance specialist when you have questions about specific expenditures. Organizations are required to reimburse their gambling account for any expenditures made that do not qualify as either an allowable expense or a lawful purpose.
In general, allowable expenses are the costs directly related to your organization's conduct of gambling, or in other words, the costs of running your gambling operation. The costs of your game inventory, the gambling manager's wages, and rent paid to a leased permitted premises are examples of allowable expenses.
The definition of lawful purpose is a list of 26 different categories of legal uses of your gambling net profits (net receipts less allowable expenses). In general, the list includes the types of legal charitable donations your organization can make and the payment of taxes on your charitable gambling proceeds.