Legislature(1997 - 1998)
04/21/1998 08:25 AM House FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 273
"An Act requiring that gross receipts and ideal gross
be used to account for charitable gaming activities;
requiring municipalities to provide to the state
records concerning sales taxes assessed for charitable
gaming activities; requiring that a charitable share of
charitable gaming receipts be dedicated to charitable
uses; relating to reports required for charitable
gaming activities; relating to payments to the state
from gross receipts of charitable gaming; relating to
contracts between operators or vendors and permittees;
relating to licensing of multiple-beneficiary
permittees and to the duties of a multiple-beneficiary
permittee to each holder of the permit; requiring a
person employed as a gaming manager to be certified by
the state; limiting the expenditure of amounts of gross
receipts and ideal gross required to be paid to
permittees or retained by permittees; relating to the
amount of gross receipts and prizes allowed under a
permit or a multiple- beneficiary permit; allowing
operators to pool gross receipts, prizes, and door
prizes among permittees; and providing for an effective
date."
TOM WILLIAMS, STAFF, SENATOR SHARP spoke in support of SB
273. He noted that the legislation revises the charitable
gaming statutes to base the amount paid to charities on a
gross percentage as opposed to net proceeds. In addition,
it creates a multiple-beneficiary permit.
Representative Mulder questioned why an ideal net was not
used. Mr. Williams observed that the concept of a broad-
based ideal net was considered. The sponsor does not
support the concept because it does not assure that a
certain percentage, of every dollar gained, goes to the
charity. The sponsor did not want to make the amount that
goes to the charity dependent on the prize pay out. He
emphasized that the intent is to remove the State from the
issue of determining what the appropriate prize level is or
what is an allowable expense. The mix of prizes and
expenses should be left to the business decision of the
charity and the operator.
BOB BARTHOLOMEW, DEPUTY DIRECTOR, INCOME AND EXCISE AUDIT
DIVISION, DEPARTMENT OF REVENUE spoke in support of the
legislation. He noted that amendments have been drafted to
address concerns. He maintained that the process and
percentages contained in the legislation are workable and
allow flexibility in prizes and expenses. He spoke against
using an ideal net. He observed that the appropriate level
of ideal net is not agreed on.
Representative Grussendorf noted concerns that businesses
that meet the 30 percent net requirement could not meet the
requirement for 7 percent of the adjusted gross. Mr.
Bartholomew noted that Amendment 1 would address those
concerns (copy on file). The percentage would be reduced
from 7 to 6.5 percent for an additional year. The amendment
would phase in the increase.
Co-Chair Hanley MOVED to ADOPT Amendment 1. Mr. Williams
explained that the legislation would go into effect January
1999. For 1999, the percentage for pull-tabs would be 6.5
percent. It would go to 7 percent in January 2000.
Amendment 1 would also change the charitable share on bingo
from 1.5 to 2 percent.
Co-Chair Hanley expressed support for the phase in proposal,
but expressed concern that operations not be put out of
business by the increase. Mr. Bartholomew stressed that 7
percent was picked based on data available to the
Department. The majority of operators would achieve 7
percent of gross. The Department worked with operators that
were not in compliance with current law to look at ways of
adjusting expenses and prizes to fit into the proposed
level. He felt confident that 7 percent of gross in the
second year would not adversely affect charitable gaming.
He observed that charity run operations pay themselves more
than 6.5 percent. He did not think there would be a
significant change in the number of non-profit permits. It
is not the intention to reduce the number of permits.
Co-Chair Hanley questioned the effect of shifting the net
pay out by a half percent. Mr. Bartholomew replied that a
reduction in a half a percent pay out on prizes would result
in an increase in gross. Prize pay-outs would have to be
managed to average between 77 and 78 percent to achieve the
percentage of gross.
Representative Mulder disclosed that he is a board member of
a charity that would be affected by the legislation.
In response to a question by Representative Mulder, Mr.
Bartholomew stated that, based on the 1997 reports, almost
100 percent of the operators are in compliance.
There being NO OBJECTION, Amendment 1 was adopted.
SB 273 was HELD in Committee for further consideration
during the meeting.
SENATE BILL NO. 273
"An Act requiring that gross receipts and ideal gross
be used to account for charitable gaming activities;
requiring municipalities to provide to the state
records concerning sales taxes assessed for charitable
gaming activities; requiring that a charitable share of
charitable gaming receipts be dedicated to charitable
uses; relating to reports required for charitable
gaming activities; relating to payments to the state
from gross receipts of charitable gaming; relating to
contracts between operators or vendors and permittees;
relating to licensing of multiple-beneficiary
permittees and to the duties of a multiple-beneficiary
permittee to each holder of the permit; requiring a
person employed as a gaming manager to be certified by
the state; limiting the expenditure of amounts of gross
receipts and ideal gross required to be paid to
permittees or retained by permittees; relating to the
amount of gross receipts and prizes allowed under a
permit or a multiple- beneficiary permit; allowing
operators to pool gross receipts, prizes, and door
prizes among permittees; and providing for an effective
date."
Co-Chair Therriault MOVED to ADOPT Amendment 2, on behalf of
Senator Sharp (copy on file). Representative Mulder MOVED
to amend Amendment 1, change 17 to 18. He explained that
the amendment would raise the charitable share for pull-tabs
to 18 percent of the gross. He spoke in support of the
amendment to Amendment 2.
BOB BARTHOLOMEW, DEPUTY DIRECTOR, INCOME AND EXCISE AUDIT
DIVISION, DEPARTMENT OF REVENUE stressed that the average
amount needed to hold harmless charities is 16 to 17 percent
of the gross. He asserted that 17 percent would hold the
greatest amount harmless.
In response to a question by Co-Chair Therriault, Mr.
Bartholomew observed that a 77 percent prize pay-out would
provide 16 percent of gross. For non-profits to receive 18
percent of gross, prize pay-outs would have to be
approximately 73 - 74 percent. Representative Davis noted
that there are variations in prize pay-outs. Mr.
Bartholomew observed that prize pay-outs run from
approximately 72 to 85 percent.
(Tape Change, HFC 98 -120, Side 1)
Mr. Bartholomew observed that prize pay-outs are driven by
what has been previously paid. Pay-outs can be higher or
lower, but they must average to the amount needed to meet
the percentage of gross. He acknowledged that charities can
negotiate for a higher share, but stressed that it is
difficult.
Representative Davies expressed concern that the level of
share is at a level that would force some people out of
business. Mr. Bartholomew agreed that the industry has
raised the issue. He stressed that the Department has
attempted to find the level that would hold operations
harmless.
TOM WILLIAMS, STAFF, SENATOR SHARP stated that the sponsor
recommended 17 percent, but does not object to 18 percent.
There being NO OBJECTION, the amendment to the amendment was
adopted. There being NO OBJECTION, Amendment 2 was adopted
as amended.
Representative Martin MOVED to ADOPT Amendment 3 (copy on
file). Mr. Bartholomew explained that Amendment 3 would
strengthen controls over how money received by non-profits
from gaming is spent. The amendment prohibits commingling
of charitable gaming proceeds with other funds. He noted
that it is hard to ascertain if money is spent appropriately
when it is commingled with funds for other purposes. The
proceeds would have to be spent directly out of the gaming
account.
Representative Foster expressed concerns that the amendment
would be difficult for small rural operations. He asked
what the penalty would be for noncompliance.
Mr. Bartholomew explained that the worst penalty would be
for them to lose their license. He observed that the
charity would already have a gaming account. The amendment
does not require a new account. Some non-profits transfer
funding into their operating account. Under the amendment
funds could not be transferred to the operating account.
There would not be a criminal penalty.
Co-Chair Therriault summarized that the Department would
approach the organization to get them to follow the rules.
Mr. Bartholomew stressed that the Department offers a chance
to come into compliance.
Representative Foster questioned if there was a problem in
rural areas. Mr. Bartholomew emphasized that the chance of
having sanctions would be small. It would make it easier to
follow the flow of money.
Representative Martin spoke in support of the amendment. He
emphasized that the amendment would not hurt charities. The
intent is to require large non-profits to keep the funds
separate from operating expenses. Mr. Williams stated that
the sponsor does not object to the amendment. He did not
think that the amendment would be onerous.
A roll call vote was taken on the motion.
IN FAVOR: Mulder, Davis, Martin, Therriault
OPPOSED: Davies, Foster, Kelly
Co-Chair Hanley and Representatives Grussendorf, Kohring and
Moses were absent from the vote.
The MOTION FAILED (4-3).
Representative Martin MOVED to ADOPT Amendment 4 (copy on
file). Amendment 4 would raise levels paid to charities
from 7 to 8.5 percent. Mr. Bartholomew stated that an
increase of 1.5 percent would significantly change the
financial pie. More money would go to non-profits, but the
unintended consequences of that large of an increase are
unknown. The intent of the legislation was to keep the
financial pie fixed.
Representative Davis spoke against the amendment. He
maintained that the amendment would force operators out of
business, which would hurt charities.
Representative Martin spoke in support of the amendment. He
asserted that not enough money is going to charity.
A roll call vote was taken on the motion.
IN FAVOR: Martin, Therriault
OPPOSED: Davies, Davis, Foster, Kelly, Mulder
Co-Chair Hanley and Representatives Grussendorf and Moses
were absent from the vote.
The MOTION FAILED (2-5).
Amendment 5 was withdrawn.
ASHLEY REED, LOBBYIST, CHARITABLE GAMING ASSOCIATION spoke
against the legislation. He observed that the industry
maintains concerns regarding the legislation. He stressed
that there is no guarantee that the legislation will be
revenue neutral. He stressed that small operations have
higher costs than large operations. He maintained that
charities would suffer from the legislation.
Co-Chair Therriault MOVED to report HCS SB 273 (FIN) out of
Committee with the accompanying fiscal note. There being NO
OBJECTION, it was so ordered.
Representative Martin maintained that true charities do not
have to worry.
HCS CSSB 273 (FIN) was REPORTED out of Committee with "no
recommendation" and with a zero fiscal note by the
Department of Revenue dated 2/27/98.
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