Primary navigation

    Lawful Purpose Expenditures - Codes 1-6

    For a quick review of the codes mentioned on this page, please refer to the LPE Code Summary Chart.

    A more detailed description of the types of expenditures allowed are listed under each code along with other requirements and restrictions.

    Code 1

    • Expenditures to or by a 501(c)(3) organization or 501(c)(4) festival organization, for its primary purpose.
      • To qualify as a "501(c)(4) festival organization" the primary purpose of the 501(c)(4) must be to conduct a festival.
      • The organization must have an IRS determination letter documenting its 501(c)(3) or 501(c)(4) classification.
      • If payment is by check, make the check payable to the organization as named on the IRS determination letter. 
      • Repair or maintenance of capital assets and real property used exclusively for code 1 does not require Gambling Control Board approval. 
        • Capital assets — For the acquisition or improvement of capital assets with a cost greater than $2,000 per item or project, refer to code 23. 
        • Real property — For real property, refer to code 24.
      • Licensed 501(c)(3)s or 501(c)(4) festival organizations may pay either the vendor directly from the gambling account for goods and services or transfer gambling funds to another account within the general fund.
        • Each year, the organization must meet 70/30 standards for general fund expenditures.
        • Note that the “49% membership in common” restriction (see below) does not apply to the transfer of funds by a 501(c)(3) or 501(c)(4) festival organization to its own general fund.
      • Contributions may not be made if the recipient organization:
        • exists primarily for the purpose of receiving and distributing gambling profits; 
        • has more than 49% of its membership in common with the contributing organization; or 
        • has an officer, director, or other person in a managerial position who is also an officer, director, or management person in the contributing organization. 
      • For contributions or payments to another licensed organization, refer to code 20.

    Code 2

    • Expenditures or contributions to relieve the effects of poverty, homelessness, or disability, provided the entire amount of the contribution or expenditure is used to relieve one or more of these effects.
    • Expenditures may be made to:
      • an individual or family 
      • a nonprofit corporation that exists exclusively for these relief purposes 
      • a vendor, for goods or services for the family or individual for these purposes
      • if the expenditure is made to a unit of government, refer to code 10.
    • An organization may spend net profits to relieve the effects of a disaster as defined in Minnesota Statutes, Section 12.03, subdivision 2, without prior membership approval if the contribution is:
      • a lawful purpose as defined under Minnesota Statutes, Section 349.12, subdivision 25 (example: code 2, a contribution to an individual to relieve the effects of homelessness or poverty caused by a disaster);
      • authorized by the organization’s chief executive officer and gambling manager; and
      • approved by the membership at the next monthly meeting. If the contribution is not approved by the membership at its next monthly meeting, the organization must reimburse its gambling account in the amount of the contribution.
        • “Disaster” means a situation that creates an actual or imminent serious threat to health and safety of persons, or a situation that has resulted or is likely to result in catastrophic loss to property or the environment; and for which traditional sources of relief and assistance within the affected area are unable to repair or prevent the injury or loss. See Minnesota Statutes, Section 12.03, subdivision 2.
    • Repair or maintenance of capital assets and real property used exclusively for code 2 does not require Gambling Control Board approval.
    • Capital assets —For the acquisition or improvement of capital assets with a cost greater than $2,000 per item or project, refer to code 23.
    • Real property —For real property, refer to code 24.

    Code 3

    • Contributions for the education, prevention, or treatment of problem gambling.
      • Problem gambling program must be recognized by the Minnesota Department of Human Services. 
      • If donation is to a unit of government, refer to code 10.

    Code 4

    • Contributions for funding a public or private nonprofit educational institution registered with or accredited by the state of Minnesota or any other state. Expenditures may be to:
      • a private, accredited, nonprofit educational institution
      • a public school (If so, an LG555 must be completed and kept in the organization records)
      • a vendor, for goods or services benefiting a private nonprofit or public educational institution. 
      • If the payment or contribution is to another licensed gambling organization that is a nonprofit educational institution, refer to code 20.

    Code 5

    • All licensed gambling organizations, for scholarships to defray the cost of education to individuals. Expenditures may be made:
      • to a nonprofit organization whose mission is to award scholarships
      • to an organization’s own scholarship winners where the scholarship process must: 
        • be awarded through an open and fair selection process that does not discriminate based on race, gender, religion, national origin, marital status, disability, or age; 
        • not be limited to organization members or their immediate families; 
        • have criteria for selection that is communicated to all participants and organization members; and 
        • ensure that scholarship winners are made public and communicated to organization members. 
      • to the individual being awarded the scholarship 
      • jointly to the student and school the scholarship winner is attending
      • If payment is directly to a public school for general scholarships, refer to code 4.

    Code 6

    • All licensed gambling organizations, for recognition of military service. Expenditures may be to:
    • individual, for participating in color guard, honor guard, or marching unit events in Minnesota or states bordering Minnesota. 
      • $50 per day limit, with no limit in a 12-month period. 
    • individual, for mileage reimbursement for providing color guard, honor guard or marching unit transportation in Minnesota or states bordering Minnesota. 
    • vendor, for purchase of goods used in activities recognizing military service, such as flags, color guard uniforms, parade rifles, bugles, etc. 
    • active military personnel and their immediate family members in need of support services (immediate family member means persons living in the same residence as the active military personnel). 
    • vendor, for purchase of goods, services, or for activities open to the public in recognition of military service, such as Memorial Day or Veterans Day services, provided that the expenditure does not result in any organization member receiving any money, or goods or services with a market value greater than $10, with a total limit of $100 in a 12-month period. This limit does not apply to active military personnel and their immediate family members in need of support services. 
    • If to a unit of government, refer to code 10.
    • If to an individual, note that a member of the contributing organization is limited to $10, with a total limit of $100 in a 12-month period, except for color guard or honor guards. 
    back to top