Amended in Senate June 2, 2015

Amended in Senate April 28, 2015

Senate Bill No. 549

Introduced by Senator Hall

(Coauthor: Senator Stone)

(Coauthors: Assembly Members Gray and Jones-Sawyer)

February 26, 2015

An act to add and repeal Section 320.6 of the Penal Code, relating to gaming.

LEGISLATIVE COUNSEL’S DIGEST

SB 549, as amended, Hall. Charitable raffles.

The California Constitution authorizes the Legislature to permit private, nonprofit, eligible organizations to conduct raffles as a funding mechanism to support beneficial and charitable works, if, among other conditions, at least 90% of the gross receipts from the raffle go directly to beneficial or charitable purposes in California. The California Constitution further authorizes the Legislature to amend the percentage of gross receipts required to be dedicated to beneficial or charitable purposes by a statute passed by a 2⁄3 vote of each house of the Legislature. Existing statutory law implements those provisions and requires the Department of Justice to administer and enforce those provisions.

This bill would authorize a raffle conducted by an eligible organization, as defined, for the purpose of directly supporting specified beneficial or charitable purposes in California, or financially supporting another private, nonprofit, eligible organization, as defined, that performs those purposes if, among other requirements, each ticket sold contains a unique and matching identifier, 50% of the gross receipts generated from the sale of raffle tickets are used to benefit or provide support for beneficial or charitable purposes, as defined, the other 50% is paid to the winner, and the winners of the prizes are determined by a manual draw, as specified. The bill would authorize an electronic device to be used to sell tickets. This bill would define an eligible organization as a private, nonprofit organization established by, or affiliated with, a team from specified sports organizations that has been qualified to conduct business in California for at least one year prior to conducting a raffle and is exempt from taxation pursuant to specified provisions of federal and California law.

The bill would require, if an eligible organization conducts a raffle for purposes of financially supporting another private, nonprofit, eligible organization, the eligible organization conducting the raffle to distribute to the other eligible organization all proceeds not paid out to the winners within 15 days of conducting the raffle. The bill would require an eligible organization to disclose to all ticket purchasers the designated private, nonprofit organization for which the raffle is being conducted.

This bill would also prohibit an eligible organization from conducting a raffle, and a manufacturer or distributor of raffle-related products or services from conducting business with an eligible organization for purposes of conducting a raffle pursuant to these provisions, without first having obtained and thereafter maintained a registration from the Department of Justice, as specified. This bill would authorize the department to issue regulations to enforce these provisions, to assess annual registration fees, as specified, to be deposited in the General Fund to cover the reasonable costs of establishing and operating this registration system, and would require the department to maintain a database of registrants and conduct specified proceedings in compliance with the Administrative Procedure Act. The bill would repeal its provisions on December 31, 2020.

Vote: ²⁄₃. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 320.6 is added to the Penal Code, to read:

320.6.  

(a) Notwithstanding Section 320.5, this section shall
apply to an eligible organization, as defined in subdivision (c).

(b) A raffle conducted by an eligible organization, as defined
in subdivision (c), for the purpose of directly supporting beneficial
or charitable purposes or financially supporting another private,
nonprofit eligible organization, as defined in subdivision (c) of
Section 320.5, that performs beneficial or charitable purposes may
be conducted in accordance with this section.

(c) For purposes of this section, “eligible organization” means
a private, nonprofit organization established by, or affiliated with,
a team from the Major League Baseball, National Hockey League,
National Basketball Association, National Football League,
Women’s National Basketball Association, or Major League
Soccer, or a private, nonprofit organization established by the
Professional begin delete Golfers Association, end delete begin insert Golfers’ Association of America, end insert
Ladies Professional begin delete Golfers end delete begin insert Golf end insert Association, or National
Association for Stock Car Auto Racing that has been qualified to
conduct business in California for at least one year prior to
conducting a raffle, is qualified for an exemption under Section
501(c)(3) of the Internal Revenue Code, and is exempt from
taxation pursuant to Section 23701a, 23701b, 23701d, 23701e,
23701f, 23701g, 23701k, 23701l, 23701t, or 23701w of the
Revenue and Taxation Code.

(d) For purposes of this section, “raffle” means a scheme for
the distribution of prizes by chance among persons who have paid
money for paper tickets that provide the opportunity to win these
prizes, in which all of the following are true:

(1) Each ticket sold contains a unique and matching identifier.

(2) (A) Winners of the prizes are determined by a manual draw
from tickets described in paragraph (1) that have been sold for
entry in the manual draw.

(B) An electronic device may be used to sell tickets. The ticket
receipt issued by the electronic device to the purchaser may include
more than one unique and matching identifier, representative of
and matched to the number of tickets purchased in a single
transaction.

(C) The prize paid to the winner is comprised of one-half or 50
percent of the gross receipts generated from the sale of raffle tickets
for a raffle.

(3) The manual draw is conducted in California under the
supervision of a natural person who meets all of the following
requirements:

(A) The person is 18 years of age or older.

(B) The person is affiliated with the eligible organization
conducting the raffle.

(C) The person is registered with the Department of Justice
pursuant to paragraph (4) of subdivision (o).

(4) (A) Fifty percent of the gross receipts generated from the
sale of raffle tickets for any given manual draw are used by the
eligible organization conducting the raffle to benefit or provide
support for beneficial or charitable purposes, or used to benefit
another private, nonprofit organization, provided that an
organization receiving these funds is itself an eligible organization
as defined in subdivision (c) of Section 320.5. As used in this
section, “beneficial purposes” excludes purposes that are intended
to benefit officers, directors, or members, as defined by Section
5056 of the Corporations Code, of the eligible organization. Funds
raised by raffles conducted pursuant to this section shall not be
used to fund any beneficial, charitable, or other purpose outside
of California. This section does not preclude an eligible
organization from using funds from sources other than the sale of
raffle tickets to pay for the administration or other costs of
conducting a raffle.

(B) An employee of an eligible organization who is a direct
seller of raffle tickets shall not be treated as an employee for
purposes of workers’ compensation under Section 3351 of the
Labor Code if the following conditions are satisfied:

(i) Substantially all of the remuneration, whether or not paid in
cash, for the performance of the service of selling raffle tickets is
directly related to sales rather than to the number of hours worked.

(ii) The services performed by the person are performed pursuant
to a written contract between the seller and the eligible organization
and the contract provides that the person will not be treated as an
employee with respect to the selling of raffle tickets for workers’
compensation purposes.

(C) For purposes of this section, an employee selling raffle
tickets shall be deemed to be a direct seller as described in Section
650 of the Unemployment Insurance Code as long as he or she
meets the requirements of that section.

(e) A person who receives compensation in connection with the
operation of the raffle shall be an employee of the eligible
organization that is conducting the raffle, and in no event may
compensation be paid from revenues required to be dedicated to
beneficial or charitable purposes.

(f) A raffle ticket shall not be sold in exchange for Bitcoin or
any other cryptocurrency.

(g) A raffle otherwise permitted under this section shall not be
conducted by means of, or otherwise utilize, any gaming machine
that meets the definition of slot machine contained in Section 330a,
330b, or 330.1.

(h) (1) A raffle otherwise permitted under this section shall not
be conducted, nor may tickets for a raffle be sold, within an
operating satellite wagering facility or racetrack inclosure licensed
pursuant to the Horse Racing Law (Chapter 4 (commencing with
Section 19400) of Division 8 of the Business and Professions Code)
or within a gambling establishment licensed pursuant to the
Gambling Control Act (Chapter 5 (commencing with Section
19800) of Division 8 of the Business and Professions Code).

(2) A raffle shall not be operated or conducted in any manner
over the Internet, nor may raffle tickets be sold, traded, or redeemed
over the Internet. For purposes of this paragraph, an eligible
organization shall not be deemed to operate or conduct a raffle
over the Internet, or sell raffle tickets over the Internet, if the
eligible organization advertises its raffle on the Internet or permits
others to do so. Information that may be conveyed on an Internet
Web site pursuant to this paragraph includes, but is not limited to,
all of the following:

(A) Lists, descriptions, photographs, or videos of the raffle
prizes.

(B) Lists of the prize winners.

(C) The rules of the raffle.

(D) Frequently asked questions and their answers.

(E) Raffle entry forms, which may be downloaded from the
Internet Web site for manual completion by raffle ticket purchasers,
but shall not be submitted to the eligible organization through the
Internet.

(F) Raffle contact information, including the eligible
organization’s name, address, telephone number, facsimile number,
or email address.

(i) An individual, corporation, partnership, or other legal entity
shall not hold a financial interest in the conduct of a raffle, except
the eligible organization that is itself authorized to conduct that
raffle, and any private, nonprofit, eligible organizations receiving
financial support from that charitable organization pursuant to
subdivisions (b) and (d).

(j) An eligible organization shall not conduct more than one
major league sports raffle per home game.

(k) An employee shall not sell raffle tickets in any seating area
designated as a family section.

(l) An eligible organization shall disclose to all ticket purchasers
the designated private, nonprofit, eligible organization for which
the raffle is being conducted.

(m) An eligible organization that conducts a raffle to financially
support another private, nonprofit eligible organization, as defined
in subdivision (c) of Section 320.5, shall distribute all proceeds
not paid out to the winners of the prizes to the private, nonprofit
organization within 15 days of conducting the raffle, in accordance
with this section.

(n) Any raffle prize remaining unclaimed by a winner at the end
of the season for a team with an affiliated eligible organization
that conducted a raffle to financially support another private,
nonprofit eligible organization, as defined in subdivision (c) of
Section 320.5, shall be donated within 30 days from the end of the
season by the eligible organization to the designated private,
nonprofit organization for which the raffle was conducted.

(o) (1) (A) An eligible organization shall not conduct a raffle
authorized under this section, unless it has a valid registration
issued by the Department of Justice. The department shall furnish
a registration form via the Internet or upon request to eligible
nonprofit organizations. The department shall, by regulation, collect
only the information necessary to carry out the provisions of this
section on this form. This information shall include, but is not
limited to, the following:

(i) The name and address of the eligible organization.

(ii) The federal tax identification number, the corporate number
issued by the Secretary of State, the organization number issued
by the Franchise Tax Board, or the California charitable trust
identification number of the eligible organization.

(iii) The name and title of a responsible fiduciary of the
organization.

(B)  begin insert (i) end insert begin insert   end insert The department may require an eligible organization to
pay a minimum annual registration fee of begin delete two thousand five
hundred dollars ($2,500) end delete begin insert five thousand dollars ($5,000) end insert to cover
the reasonable costs of the department to administer and enforce
this section.

begin insert

(ii) An eligible organization shall pay, in addition to the annual
registration application fee, one hundred dollars ($100) for every
individual raffle conducted at an eligible location to cover the
reasonable costs of the department to administer and enforce this
section. This fee shall be submitted in conjunction with the annual
registration form.

end insert

(2) (A) A manufacturer or distributor of raffle-related products
or services shall not conduct business with an eligible organization
for purposes of conducting a raffle pursuant to this section unless
the manufacturer or distributor has a valid annual registration
issued by the department.

(B) The department may require a manufacturer or distributor
of raffle-related products or services to pay a minimum annual
registration fee of five thousand dollars ($5,000) to cover the
reasonable costs of the department to administer and enforce this
section.

(3) An eligible organization shall register the equipment used
in the sale and distribution of raffle tickets, and shall have the
equipment tested by an independent gaming testing lab.

(4) (A) A person affiliated with an eligible organization who
conducts the manual draw shall annually register with the
department.

(B) The department may require a person affiliated with an
eligible organization who conducts the manual draw to pay a
minimum annual registration fee of ten dollars ($10) to cover the
reasonable costs of the department to administer and enforce this
section.

(5) The department may, by regulation, adjust the annual
registration fees described in this section as needed to ensure that
revenues will fully offset, but not exceed, the reasonable costs
incurred by the department pursuant to this section. The fees shall
be deposited by the department into the General Fund.

(6) The department shall receive moneys for the costs incurred
pursuant to this section subject to an appropriation by the
Legislature.

(7) The department shall adopt regulations necessary to
effectuate this section, including emergency regulations, pursuant
to the Administrative Procedure Act (Chapter 3.5 (commencing
with Section 11340) of Part 1 of Division 3 of Title 2 of the
Government Code).

(8) The department shall maintain an automated database of all
registrants.

(9) A local law enforcement agency shall notify the department
of any arrests or investigation that may result in an administrative
or criminal action against a registrant.

(10) The department may investigate all suspected violations
of this section or any regulation adopted pursuant to this section,
or any activity that the registrant has engaged in that is not in the
best interests of the public’s health, safety, or general welfare as
it pertains to charitable raffles.

(11) The department may audit the records and other documents
of a registrant to ensure compliance with this section, and may
charge a registrant the direct costs associated with an audit
conducted pursuant to this paragraph.

(12) (A) Once registered, an eligible organization shall file
annually thereafter with the department a report that includes the
following:

(i) The aggregate gross receipts from the operation of raffles.

(ii) The aggregate direct costs incurred by the eligible
organization from the operation of raffles.

(iii) The charitable or beneficial purposes for which proceeds
of the raffles were used, or identify the eligible recipient
organization to which proceeds were directed, and the amount of
those proceeds.

(B) Failure to submit the annual report to the department as
required in this paragraph shall be grounds for denial of an annual
registration.

(13) The department shall annually furnish to registrants a form
to collect this information.

(p) The department may take legal action against a registrant if
it determines that the registrant has violated this section or a
regulation adopted pursuant to this section, or that the registrant
has engaged in any conduct that is not in the best interests of the
public’s health, safety, or general welfare. An action taken pursuant
to this subdivision does not prohibit the commencement of an
administrative or criminal action by the Attorney General, a district
attorney, city attorney, or county counsel.

(q) An action and hearing conducted to deny, revoke, or suspend
a registry, or other administrative action taken against a registrant,
shall be conducted pursuant to the Administrative Procedure Act
(Chapters 4.5 (commencing with Section 11400) and 5
(commencing with Section 11500) of Part 1 of Division 3 of Title
2 of the Government Code). The department may seek civil
remedies, including imposing fines, for violations of this section,
and may seek recovery of the costs incurred in investigating or
prosecuting an action against a registrant or applicant in accordance
with those procedures specified in Section 125.3 of the Business
and Professions Code. A proceeding conducted under this
subdivision is subject to judicial review pursuant to Section 1094.5
of the Code of Civil Procedure. A violation of this section shall
not constitute a crime.

(r) This section shall remain in effect only until December 31,
2020, and as of that date is repealed, unless a later enacted statute,
that is enacted before December 31, 2020, deletes or extends that
date.