By James Hannah
The Associated Press

DAYTON, Ohio - A new state law targeting scam artists is frightening fraternal and veterans groups that raise money through gambling for the needy in their towns.

Organizations such as the Veterans of Foreign Wars and Eagles fear that the law, which went into effect July 1, could wipe out their donations to local causes by requiring half the proceeds be given to federally certified charities.

"If we've got a hungry family in town, we can't donate to that," said William Seagraves, a member of VFW Post 9582 in suburban Vandalia.

The law capped a three-year crackdown on bingo operations that sometimes provided little money to the charitable groups they said they were helping.

Organizations previously could run gambling operations as long as all of the proceeds went to charity. However, some groups used some of the money to maintain their facilities or bankroll their operations, which was illegal.

Under the new law, the groups can legally use 45 percent of the proceeds for overhead, but must send 50 percent to federally chartered charities.

That leaves 5 percent for local causes.

State Rep. Derrick Seaver, D-Minster, voted for the bill but now wants to allow fraternal and veterans groups to use all profits for their own charitable purposes, enabling them to donate as much as they want for local needs.

"There were a lot of unintended consequences," Seaver said.

The bill's sponsor, state Rep. Jon Husted, R-Kettering, said the law does not hurt local donations. He said the veterans and fraternal organizations can set up their own charities, get them certified and then funnel money to community efforts through those charities.

Andy Caprella, an official with VFW Post 1275 in Lima, said he fears the law could prevent the post from supplying honor guards, Bibles and flags for veterans' funerals and from donating money to local Boy Scout troops and distributing Halloween candy to children.

"They're dictating where the money goes," Caprella said. "We were all asleep at the switch."

To become a federally chartered charity, a group must apply to the Internal Revenue Service for a license.

The charity must be dedicated to such things as helping the poor or advancing education. It is barred from trying to influence legislation and engaging in political campaigns.