BILL ANALYSIS Ó SB 549 Page 1 Date of Hearing: July 8, 2015 ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION Adam Gray, Chair SB 549 (Hall) - As Amended June 23, 2015 SENATE VOTE: 38-0 SUBJECT: Charitable raffles. SUMMARY: 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 until December 31, 2020. Specifically, this bill: 1) Authorizes 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 of America, Ladies Professional Golf Association, or National Association for Stock Car Auto Racing to conduct a raffle where 50 percent of the gross receipts are paid to winners, and 50 percent are used to benefit a charity organization or private, nonprofit organization. SB 549 Page 2 2) Provides that tickets sales may be conducted by the use of an electronic device, but prohibits any sales over the Internet. 3) Provides a random number generator is not used for the manual draw or to sell tickets. 4) Requires each ticket sold to contain a unique and matching identifier, and declares that winners must be determined by a manual draw. 5) Provides 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. 6) Provides that the manual draw must be conducted under the supervision of a natural person who is at least 18 years of age, is affiliated with the organization conducting the raffle, and is annually registered with the Department of Justice, paying a minimum fee of $10. 7) Prohibits the use of Bitcoin or other crypto currency in the sales of raffle tickets; prohibits the use of any gaming machine that meets the definition of slot machine; and prohibits the sale of raffle tickets within an operating satellite wagering facility or racetrack inclosure. 8) Provides that an eligible organization may post specified items on the Internet Web site such as descriptions of prizes, lists of winners, rules of the raffle, contact information, SB 549 Page 3 FAQs, and entry forms that may be downloaded and printed but not submitted online. 9) Limits the number of raffles held to one at each major league home game. 10) Prohibits the sale of raffle tickets in any seating area designated as a family section, and requires the disclosure of the designated private, nonprofit, eligible organization to all ticket purchasers. 11) Requires the distribution of proceeds to the nonprofit organization within 15 days of conducting the raffle. 12) Requires each eligible organization to register annually with the Department of Justice (DOJ) and requires DOJ to furnish a registration form via the Internet or upon request from an eligible organization. 13) States DOJ may require an eligible organization to pay a minimum annual registration fee offive thousand dollars ($5,000) to cover the reasonable costs of the department to administer and offset cots. 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 DOJ for administration and enforcement. This fee shall be submitted in conjunction with the annual registration form. 14) Requires a manufacturer or distributor of raffle-related products or services to pay a minimum annual registration fee of $5,000 to cover the reasonable administrative and enforcement costs. All equipment must be registered and tested by an SB 549 Page 4 independent gaming-testing lab. 15) Requires DOJ to adopt regulations pursuant to this 50/50 raffle authorization. 16) Requires DOJ to maintain an automated database of all registrants, and for local law enforcement agencies to notify the department of any arrests or investigation that may result in an administrative or criminal action against a registrant. 17) Requires each registered eligible organization to file an annual report with DOJ that includes the aggregate gross receipts from the operation of raffles, the aggregate direct costs incurred, and the charitable or beneficial purposes for which proceeds of the raffles were used. 18) Authorizes DOJ to investigate all suspected violations, and to audit records to ensure compliance. The department may charge a registrant the direct costs associated with an audit. 19) Authorizes the DOJ to seek civil remedies against a registrant for violations of this 50/50 authority or regulations, as specified, and authorizes the department to seek recovery of the costs incurred in investigating or prosecuting an action against a registrant. 20) Contains a December 31, 2020 sunset date. EXISTING LAW: 1)Authorizes, under the California Constitution, to permit SB 549 Page 5 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 SB 549 Page 6 statute passed by a 2/3 vote of each house of the Legislature. FISCAL EFFECT: Unknown COMMENTS: 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 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. Background . 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. SB 549 Page 7 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. SB 549 Page 8 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. In opposition . According to CalNonprofits, this bill creates a carve-out with special rules for an exclusive set of nonprofit organizations affiliated with major league sports teams while all other charities - the overwhelming majority of the 72,000 nonprofit organizations in California - would be required to follow the 90/10 rules. 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. Prior Legislation . AB 1691 (Jones-Sawyer), 2013-2014 Legislative Session. 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 549 Page 9 SB 200 (Correa), Chapter 38, Statutes of 2009. 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 from 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. 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) 2003-2005 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 cash raffle. (Never heard in Assembly Governmental Organization Committee) SB 639 (McPherson), Chapter 778, Statutes of 2000. 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 SB 549 Page 10 gross receipts from the sale of raffle tickets are used to benefit or provide support for the charitable or beneficial purposes of the conducting nonprofit. SCA 4 (McPherson), Resolution Chapter 123, Statutes of 1999. 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. REGISTERED SUPPORT / OPPOSITION: Support AEG American Legion-Department of California AMVETS- Department of California Anaheim Duck Hockey Club/ Anaheim Ducks Foundation Anaheim Ducks Learn to Play program Anaheim Ducks S.C.O.R.E program SB 549 Page 11 Auto Club Speedway California State Commanders Veterans Council CHOC at Mission CHOC Children's Hospital Donor Network West Girls Incorporated of Orange County Junior Blind LA Galaxy/LA Galaxy Foundation LA Kings/ Kings Care Foundation Los Angeles Angels of Anaheim/ Angels Baseball Foundation Los Angeles Clippers/Clippers Foundation Michael Ottolini AMVETS Post 40 of Sonoma County Military Officers Association of America, Alta Chapter SB 549 Page 12 Military Officers Association of America, California Council of Chapters Military Officers Association of America, Solano County Chapter Orangewood Children's Foundation Pacific Club IMPACT Foundation Rancho Cordova Police Activities League Sacramento Kings/Sacramento Kings Foundation Sacramento Republic Football Club San Diego Padres/Padres Foundation San Francisco Giants/ San Francisco Giants Community Fund San Jose Sharks/ Sharks Foundation South County Outreach The Los Angeles Dodgers/Los Angeles Dodgers Foundation United Way California Capitol Region SB 549 Page 13 University of Southern California Veteran Tickets Foundation Veterans of Foreign Wars of California 1st District Veterans of Foreign Wars Post 2275, El Cajon Veterans of Foreign Wars, Department of California VFW Post 3787, Mission Valley San Diego VFW Post 5431 VFW-Department of California Vietnam Veterans of America - California State Council Vietnam Veterans of America, Chapter #223 Opposition SB 549 Page 14 California Society of Association Executives CalNonprofits Analysis Prepared by:Eric Johnson / G.O. / (916) 319-2531