BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 549|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
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THIRD READING
Bill No: SB 549
Author: Hall (D), et al.
Amended: 6/2/15
Vote: 27
SENATE GOVERNMENTAL ORG. COMMITTEE: 10-0, 4/14/15
AYES: Hall, Berryhill, Block, Gaines, Galgiani, Hernandez,
Hill, Lara, McGuire, Vidak
NO VOTE RECORDED: Hueso
SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/28/15
AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen
SUBJECT: Charitable raffles
SOURCE: American Legion - Department of California
AMVETS Department of California
California Council of Chapters
California State Commanders Veterans Council
Jewish War Veterans Department of California
Military Officers Association of American
VFW - Department of California
Vietnam Veterans of America - California State
Council
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.
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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.
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.
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
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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 of America, Ladies
Professional Golf 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:
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 meets all of the
following requirements:
i) The person is 18 years of age or older.
ii) The person is affiliated with the eligible
organization conducting the raffle.
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iii) The person is registered with the Department of
Justice (DOJ).
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
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
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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,
facsimile number, or email address.
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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 has a valid registration issued by 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 a minimum annual registration fee of $5,000 to cover the
reasonable costs of DOJ to administer and enforce the
provisions of this bill.
20)Specifies that an eligible organization shall pay, in
addition to the annual registration fee, $100 for every
individual raffle conducted at an eligible location to cover
the reasonable costs of DOJ to administer and enforce the
provisions of this bill. This fee shall be submitted in
conjunction with the annual registration form.
21)Specifies that a manufacturer or distributor of
raffle-related products or services shall not conduct
business with an eligible organization for purposes of
conducting a raffle unless the manufacturer or distributor
has a valid annual registration issued by DOJ.
22)Specifies that DOJ may require a manufacturer or distributor
of raffle-related products or services to pay a minimum
annual registration fee of $5,000 to cover the reasonable
costs of DOJ to administer and enforce the provisions of this
bill.
23)Requires an eligible organization to register the equipment
used in the sale and distribution of raffle tickets, and
shall have the equipment tested by an independent gaming
tested lab.
24)Requires a person affiliated with an eligible organization
who conducts the manual draw to annually register with DOJ.
25)Specifies that DOJ may require a person affiliated with an
eligible organization who conducts the manual draw to pay a
minimum annual registration fee of $10 to cover the
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reasonable costs of DOJ to administer and enforce the
provisions of this bill.
26)Specifies that DOJ may, by regulation, adjust the annual
registration fees as needed to ensure that revenues will
fully offset, but not exceed, the reasonable costs incurred
by DOJ pursuant to the provisions of this bill. The fees
shall be deposited by DOJ into the General Fund.
27)Specifies that DOJ shall receive the moneys for the costs
incurred by the provisions of this bill by an appropriation
by the Legislature.
28)Specifies that DOJ shall adopt regulations necessary to
effectuate the provisions of this bill, including emergency
regulations.
29)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. DOJ
may audit the records and other documents of a registrant to
ensure compliance with the provisions of this bill and may
charge a registrant the direct costs associated with an
audit.
30)Specifies that DOJ may investigate all suspected violations
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.
31)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
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eligible recipient organization to which proceeds were
directed, and the amount of those proceeds.
32)Specifies that failure to submit the annual report to DOJ
shall be grounds for denial of an annual registration.
33)Requires DOJ to annually furnish to registrants a form to
collect this information.
34)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.
35)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 civil
remedies, including imposing fines and may seek recovery of
the costs incurred in investigating or prosecuting an action
against a registrant or applicant. A violation of this
section shall not constitute a crime.
36)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.
History. Charitable raffles have been legal in the State of
California since July 1, 2001, with the successful passage of SB
639 (McPherson, Chapter 778) 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 the legislation always failed passage.
Prior/Related Legislation
AB 1691 (Jones-Sawyer, 2014) 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)
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FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: No
According to the Senate Appropriations Committee, annual costs
of approximately $2.9 million for investigations and enforcement
to DOJ (General Fund). Additionally, the first year costs would
include approximately $576,000 for software changes to
accommodate the new license type, and configuration and testing
of existing software changes. These costs will be partially
offset by fee revenue.
SUPPORT: (Verified 6/1/15)
American Legion - Department of California (co-source)
AMVETS - Department of California (co -source)
California Council of Chapters (co -source)
California State Commanders Veterans Council (co -source)
Jewish War Veterans Department of California (co -source)
Military Officers Association of American (co -source)
VFW - Department of California (co -source)
Vietnam Veterans of America - California State Council (co
-source)
AEG
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
Clippers Foundation
Donor Network West
Giants Community Fund
Girls Incorporated of Orange County
Impact Foundatoin
Junior Blind of America
Kings Care Foundation
Los Angeles Angels of Anaheim
Los Angeles Dodgers
Los Angeles Dodgers Foundation
Los Angeles Galaxy
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Los Angeles Galaxy Foundation
Los Angeles Kings
Military Officers Association of America, Alta Chapter
Orangewood Children's Foundation
Pacific Club IMPACT Foundation
Padres Foundation
Rancho Cordova Police Activities Leagues
Sacramento Kings
Sacramento Kings Foundation
Sacramento Republic Football Club
San Diego Padres
San Francisco Giants
San Francisco Giants Community Fund
San Jose Sharks
San Jose Sharks Foundation
South County Outreach
University of Southern California
Veterans of Foreign Wars
Veteran Tickets Foundation
OPPOSITION: (Verified 6/1/15)
California Coalition Against Gambling Expansion
California Tribal Business Alliance
CalNonprofits
Pala Band of Mission Indians
Viejas Band of Kumeyaay Indians
Yocha Dehe Wintun Nation
ARGUMENTS IN SUPPORT: According to supporters of this 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.
ARGUMENTS IN OPPOSITION: According to CalNonprofits, this
bill creates a carve-out with special rules for an exclusive set
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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.
Prepared by:Felipe Lopez / G.O. / (916) 651-1530
6/2/15 22:21:34
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