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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