BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Isadore Hall, III
Chair
2015 - 2016 Regular
Bill No: SB 549 Hearing Date: 4/14/2015
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|Author: |Hall |
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|Version: |2/26/2015 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Felipe Lopez |
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SUBJECT: Charitable raffles
DIGEST: This bill authorizes an eligible organization, as
defined, to conduct a 50/50 raffle for the purpose of directly
supporting a specified beneficial or charitable purpose in
California, or financially supporting another private,
nonprofit, eligible organization.
ANALYSIS:
Existing law:
1)Authorizes, under the California Constitution, to permit
private, nonprofit, eligible organizations to conduct raffles
as a funding mechanism to support beneficial and charitable
works if at least 90% of the gross receipts from the raffle go
directly to beneficial or charitable purposes in California.
2)Prohibits any raffle to be conducted by means of, or otherwise
utilize any gaming machine, apparatus, or device, whether or
not that machine, apparatus, or device meets the definition of
a slot machine as currently defined in California law.
3)Defines a "raffle" as 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 and where
specified conditions are met.
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4)Defines an "eligible organization" as a private, nonprofit
organization that has been qualified to conduct business in
California for at least one year prior to conducting a raffle
and is exempt from taxation by the Internal Revenue Service.
5)Authorizes, under the California Constitution, for 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.
6)Requires the Department of Justice (DOJ) to conduct a study
and report to the Legislature by December 31, 2003 on the
impact of charitable raffles in California. The study is
required to include information on whether the number of
raffles had increased, the amount of money raised through
raffles and whether this amount increased, whether there were
consumer complaints, and whether there is increased fraud in
the operations of raffles.
This bill:
1)Authorizes an eligible organization, as defined, to conduct a
50/50 raffle for the purpose of directly supporting specified
beneficial or charitable purposes in California, or
financially supporting another private, nonprofit, eligible
organization.
2)Defines an "eligible organization" as 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 Golfers Association, Ladies Professional Golfers
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 as specified.
3)Defines "raffle" as 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:
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a) Each ticket sold maintains a unique and matching
identifier.
b) Winners of the prizes are determined by a manual draw
from tickets that have been sold for entry in the manual
draw. 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. 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.
c) The manual draw is conducted in California under the
supervision of a natural person who is 18 years of age or
older.
d) 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.
4)Specifies that a beneficial purpose excludes purposes that are
intended to benefit officers, directors, or members and
specifies that funds raised by 50/50 raffles shall not be used
to fund any beneficial, charitable, or other purpose outside
of California. An eligible organization is allowed to use
funds from sources other than the sale of raffle tickets to
pay for the administration or other costs of conducting a
raffle.
5)Specifies that 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 if the
following conditions are satisfied:
a) 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 the number of hours worked.
b) 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
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purposes.
6)Specifies that an employee selling raffle tickets shall be
deemed to be a direct seller, as described.
7)Specifies that 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.
8)Specifies that a raffle ticket shall not be sold in exchange
for Bitcoin or any other cryptocurrency.
9) Specifies that 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 a
slot machine, as defined.
10) Specifies that 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.
11) Specifies that 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. 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 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, partnership, including the
eligible organization's name, address, telephone number,
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facsimile number, or email address.
12) Specifies that 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.
13) Prohibits an eligible organization from conducting more
than one raffle per home game.
14) Prohibits the sale of raffle tickets in any seating area
designated as a family section.
15) Requires the eligible organization to disclose to all
ticket purchasers the designated private, nonprofit,
eligible organization for which the raffle is being
conducted.
16) Specifies that an eligible organization that conducts a
raffle to financially support another private, nonprofit
eligible organization 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.
17) Specifies that 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 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.
18) An eligible organization shall not conduct a raffle unless
it registers annually with the DOJ. The DOJ shall furnish a
registration form via the Internet or upon request to
eligible nonprofit organizations. The DOJ shall, by
regulation, collect only the information necessary to carry
out the provisions of this bill. This information shall
include, but is not limited to, the following:
a) The name and address of the eligible organization.
b) The federal tax identification number, the corporate
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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.
c) The name and title of a responsible fiduciary of the
organization.
19) Specifies that DOJ may require an eligible organization to
pay an annual registration fee of $10 dollars to cover the
reasonable costs of the department to administer and enforce
the provisions of this bill. The DOJ may, by regulation,
adjust the annual registration fee as needed to ensure that
revenues will fully offset, but do not exceed, the
reasonable costs incurred by DOJ. The fee shall be
deposited into the General Fund.
20) Specifies that DOJ shall receive the moneys for the costs
incurred by the provisions of this bill by an appropriation
by the Legislature.
21) Specifies that DOJ shall adopt regulations necessary to
effectuate the provisions of this bill, including emergency
regulations.
22) Requires DOJ to maintain an automated database of all
registrants. Each local law enforcement agency shall notify
DOJ of any arrests or investigation that may result in an
administrative or criminal action against a registrant. The
department may audit the records and other documents of a
registrant to ensure compliance with the provisions of this
bill.
23) Requires an eligible organization, once registered, to
annually file with DOJ a report that includes the following:
a) The aggregate gross receipts from the operation of
raffles.
b) The aggregate direct costs incurred by the eligible
organization from the operation of raffles.
c) 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.
24) Requires DOJ to annually furnish to registrants a form to
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collect this information.
25) Specifies that the registration and reporting provisions
of this bill do not apply to any religious corporation sole
or other religious corporation or organization that holds
property for religious purposes, to a cemetery corporation,
or a charitable corporation organized and operated primarily
as a religious organization, educational institutional,
hospital, or health care service plan, as defined.
26) Specifies that DOJ may take legal action against a
registrant if it determines that the registrant has violated
provisions of this bill or a regulation adopted, 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 by DOJ does not prohibit the
commencement of an administrative or criminal action by the
Attorney General, or district attorney, city attorney, or
county counsel.
27) Specifies that 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. The DOJ may
seek recovery of costs incurred in investigating or
prosecuting an action against a registrant or applicant, as
specified.
28) Specifies that the provisions of this bill 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.
Background
Purpose of the bill: According to the author, across the United
States more than 100 professional sports franchises are
successfully operating 50/50 charitable raffles at sporting
events in order to maximize donations to local charities. These
types of charitable raffles are raffles in which 50% of the
proceeds go to the winner, and 50% of the proceeds go to the
local charities designated by the professional sports team for
that particular event.
The author further argues that results of 50/50 charitable
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raffles in other states have been stellar, and are now being
held in more than 29 states and 10 Canadian provinces. This
bill provides an opportunity for fans who attend professional
sporting events to voluntarily participate in a raffle directly
benefiting charities in their local communities.
The author concludes that SB 549 does not change underlying
protections of Proposition 17 of 2000, and maintains protections
against individuals, corporations, partnerships or other legal
entities conducting raffles. Charitable organizations holding
50/50 raffles will be required to register, report, and be
regulated by DOJ.
History: Charitable raffles have been legal in the State of
California since July 1, 2001, with the successful passage of SB
639 (McPherson) in the 1999-2000 legislative session and voter
approval of Proposition 17.
Despite their previous illegality, raffles had long been a
popular fundraising tool used by various nonprofit
organizations. Thus in 2000, local law enforcement authorities
and members of the nonprofit community decided to sponsor
legislation to legalize some raffles and bring the then illegal
raffles out of the shadows and provide for regulation to these
types of raffles.
Because a constitutional amendment was needed, Proposition 17 in
2000 was approved by California voters with 59% of the vote to
exempt charitable raffles from the prohibition against lotteries
provided that the Legislature established reasonable statutory
regulations and that 90% of the gross receipts from raffles go
directly to beneficial or charitable purposes.
The breakdown of 90/10 would ensure that these charitable
raffles were conducted for the sole purpose of charitable
giving. Proposition 17 also authorized the Legislature to
change the percentages of gross receipts that must go directly
to charitable purposes with a two-thirds vote of the Legislature
and approval by the Governor. Since the passage of both
Proposition 17 and SB 639 (McPherson), there have been various
attempts to change the percentage allocated for charitable
purposes but have always failed passage.
Money raised through 50/50 raffles: The amount of money that
has been raised in other states through 50/50 raffles has been
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quite large. The Phoenix Coyotes, a professional sports hockey
team that plays in a venue that seats roughly 18,000 people,
conducted various 50/50 raffles throughout the 2013-14 season.
Only three times did the gross ticket sales fall below $10,000
dollars and actually grossed over $38,000 dollars on one
occasion. Overall, the Phoenix Coyotes averaged around $18,000
per 50/50 raffle, meaning that on average, the 50/50 raffles
that were conducted at their home games resulted in a prize for
the winner of $9,000 and $9,000 raised for charity. These
numbers are sure to increase in larger venues such as in
baseball and football stadiums. As an example the largest gross
receipts for the Arizona Diamondbacks was approximately
$100,000, meaning that a particular charity was able to raise
$50,000.
DOJ report to the Legislature: As previously stated, SB 639
(McPherson) required DOJ to report to the Legislature on the
impact of charitable raffles in California by December 31, 2003.
The report found that from the first to second year of the
program, the number of organizations registered with DOJ
increased substantially. In the first year, 762 organizations
registered. In the second year, there were 1,016 organizations
that registered.
In that first year 324 of the organizations filed reports with
DOJ, indicating that 656 raffles were conducted. The reports
filed indicate $4,049,792 in gross receipts from ticket sales
for all raffles reported. The amount of money raised by each
raffle varied widely, ranging from a low of five dollars to a
high of $398,929. The average amount of money per raffle raised
from ticket sales was $6,173. The amount to charity in the
first year was $3,560,901.
In the second year, 379 of the registered organizations filed
reports indicating that 652 raffles were conducted. The reports
indicated $5,936,054 in gross receipts from ticket sales for all
raffles reported. The amount of money raised by each raffle
varied widely, ranging from a low of eight dollars to a high of
$2,392,861. The average amount of money raised per raffle from
ticket sales was $9,104. It is important to note that this
average was highly elevated by one raffle which brought in well
over 2 million dollars in ticket sales. The amount to charity
in the second year was $5,455,803.
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Prior/Related Legislation
AB 1691 (Jones-Sawyer), 2013-2014 Legislative Session. The bill
would have authorized an eligible organization to conduct a
50/50 raffle for the purpose of directly supporting specified
beneficial or charitable purposes in California, or financially
supporting another private, nonprofit, eligible organization.
(Held in Assembly Appropriations Committee)
SB 200 (Correa), Chapter 38, Statutes of 2009. The bill
authorized eligible organizations to advertise raffles over the
Internet.
AB 1588 (Soto), 2007-2008 Legislative Session. The bill would
have decreased the percentage of gross receipts from the sale of
raffle tickets required to go to beneficial or charitable
purposes form 90% to 50% for a 50/50 raffle and from 90% to 60%
for a dream home raffle, as defined. (Never Heard in Assembly
Governmental Organization Committee)
SB 1369 (Cedillo), Chapter 748, Statutes of 2008. The bill
authorized remote caller bingo as a game in which specific
tax-exempt organizations, as defined, may use audio or video
technology to link designated in-state facilities for playing
bingo pursuant to a local ordinance and state regulation and
oversight. The bill provided that remote caller bingo could
only be played using traditional paper or other tangible bingo
cards and daubers, and shall not be played using electronic
devices. In addition, the bill provided that prizes for remote
caller bingo could not exceed 37% of the gross receipts of the
game and overhead may not exceed 20%, as defined.
AB 423 (Longville) 2003-2004 Legislative Session. The bill
would have decreased the percentage of gross receipts from the
sale of raffle tickets required to go to beneficial or
charitable purposes from 90% to 50% for a 50/50 raffle. (Never
heard in Assembly Governmental Organization Committee)
SB 639 (McPherson), Chapter 778, Statutes of 2000. The bill
permitted raffles to be conducted by private, nonprofit
organizations, for the purposes of providing financial support
for beneficial charitable works if, among other criteria, at
least 90% of the gross receipts from the sale of raffle tickets
are used to benefit or provide support for the charitable or
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beneficial purposes of the conducting nonprofit.
SCA 4 (McPherson), Resolution Chapter 123, Statutes of 1999.
This bill placed Proposition 17 on the March 2000 ballot, which
was approved by the voters to authorize charitable raffles in
California, provided that at least 90% of the gross receipts
from the raffle go directly to beneficial or charitable
purposes, as defined.
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: No
SUPPORT:
American Legion - Department of California (Co-sponsor)
AMVETS - Department of California (Co-sponsor)
California State Commanders Veterans Council (Co-sponsor)
Military Officers Association of American (Co-sponsor)
California Council of Chapters (Co-sponsor)
Jewish War Veterans Department of California (Co-sponsor)
VFW - Department of California (Co-sponsor)
Vietnam Veterans of America - California State Council
(Co-sponsor)
Anaheim Ducks Hockey Club
Anaheim Ducks Foundation
Anaheim Ducks Learn to Play Program
Anaheim Ducks S.C.O.R.E.
Angels Baseball Foundation
Auto Club Speedway
Children's Hospital of Orange County
Children's Hospital of Orange County at Mission
Giants Community Fund
Junior Blind of America
Kings Care Foundation
Los Angeles Angels of Anaheim
Los Angeles Dodgers
Los Angeles Dodgers Foundation
Los Angeles Galaxy
Los Angeles Galaxy Foundation
Los Angeles Kings
Orangewood Children's Foundation
Sacramento Kings
Sacramento Kings Foundation
Sacramento Republic Football Club
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San Francisco Giants
San Jose Sharks
San Jose Sharks Foundation
University of Southern California
Veteran Tickets Foundation
OPPOSITION:
California Coalition Against Gambling Expansion
CalNonprofits
Viejas Band of Kumeyaay Indians
Yocha Dehe Wintun Nation
ARGUMENTS IN SUPPORT: According to supporters of the bill,
currently more than 100 professional sports franchises operate
50/50 charitable raffles at sporting events in order to maximize
donations to community philanthropic causes. Supporters argue
that the results have been overwhelmingly successful for teams,
fans and charities alike. Using cutting-edge, transparent and
secure in-game technologies, sports franchises across the
country have documented a significant and immediate increase in
philanthropic contributions to charitable foundations.
Supporters argue that due to a restriction in law passed before
these technologies existed, California teams face an uneven
playing field when it comes to charitable raffles.
Many of the supporters argue that while they are already
providing an abundance of charitable contributions to their
local charities, they feel that passage of this bill will give
them the opportunity to do much more to benefit their local
charities and organizations in need.
ARGUMENTS IN OPPOSITION: According to CalNonprofits, SB 549
would create a carve-out with special rules for an exclusive set
of nonprofit organizations affiliated with major league sports
teams while all other charities, such as school bands, churches,
and garden clubs, would be limited to the current 90/10 rule.
CalNonprofits further argues that current law ensures that the
primary purpose of any charitable raffle is to benefit a charity
and that raffles with the 50/50 split move away from that
intent, and may inadvertently put more focus on gambling to win
a cash prize.
According to the California Coalition Against Gambling Expansion
(CAGE), the past Legislative Sessions have seen a long laundry
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list of gambling expansion legislation of every conceivable
form, from a slew of bills to lift specific cardroom limits, to
authorizing off-track betting parlors for horse racing, to
permit call-in bingo games, to allow our Lottery to go national,
be privatized and remove many of the promised restrictions made
to voters, to expand the number of tribal slot machines, to
authorize online poker, and the list goes on and on. CAGE
believes that before policymakers consider authoring or
supporting more bills to expand gambling activities, they ought
to consider the social, economic, and moral impact that more
legalized gambling will have on our State and its citizenry.
CAGE argues that while this bill overtly deals with "charitable
raffles," by reducing the current requirement of 90% of gross
receipts down to 50% that must go to the charitable
organization, there will be an increased incentive for
individuals and businesses seeking profits via raffle game
management to increase the number and scope of raffle contests.
DUAL REFERRAL: Senate Public Safety Committee