BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 549| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- UNFINISHED BUSINESS Bill No: SB 549 Author: Hall (D), et al. Amended: 8/28/15 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 SENATE FLOOR: 38-0, 6/3/15 AYES: Allen, Anderson, Bates, Beall, Berryhill, Block, Cannella, De León, Fuller, Gaines, Galgiani, Glazer, Hall, Hancock, Hernandez, Hertzberg, Hill, Hueso, Huff, Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Pavley, Roth, Runner, Stone, Vidak, Wieckowski, Wolk NO VOTE RECORDED: Jackson, Nguyen ASSEMBLY FLOOR: 64-7, 9/2/15 - See last page for vote 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 SB 549 Page 2 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. Assembly Amendments decrease the sunset from five to three years. In addition, the amendments require an eligible organization, once registered, to annually file with the Department of Justice (DOJ) a report that includes specified information for each of the eligible organization's last three fiscal years, and require the DOJ to make those reports available online, as provided. Finally, the amendments require the DOJ to adopt, on or before June 1, 2016, regulations to enforce the provisions of this bill. 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) 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: SB 549 Page 3 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 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, as specified. 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 certain specified conditions are satisfied. 6) Specifies that an employee selling raffle tickets shall be deemed to be a direct seller, as described. SB 549 Page 4 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. 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 SB 549 Page 5 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)Provides that 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. 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. SB 549 Page 6 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 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, on or before June 1, 2016, 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. SB 549 Page 7 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 the DOJ a report that includes specified information for each of the eligible organization's last three fiscal years and requires the DOJ to make those reports available online, as provided. Failure to submit the annual report to DOJ shall be grounds for denial of an annual registration. 32)Requires DOJ to annually furnish to registrants a form to collect this information. 33)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. 34)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. 35)Specifies that the provisions of this bill shall remain in effect only until December 31, 2018, and as of that date is repealed, unless a later enacted statute, that is enacted before December 31, 2018, deletes or extends that date. Background Purpose of the bill: According to the author, across the United SB 549 Page 8 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. According to the author the 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. 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. 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. Prior/Related Legislation AB 1691 (Jones-Sawyer, 2014) would have authorized an eligible SB 549 Page 9 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) FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: No According to the Assembly Appropriations Committee, ongoing General Fund costs to the DOJ's Bureau of Gambling Control for administration and enforcement of approximately $575,000 per year. Over time, those costs may be recovered, in whole or in part, through annual and per-raffle registration fees. SUPPORT: (Verified9/2/15) 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 Foundation Anaheim Ducks Hockey Club Anaheim Ducks Learn to Play Anaheim Ducks S.C.O.R.E. Angels Baseball Foundation Auto Club Speedway CHOC Children's Hospital CHOC at Mission Children's Law Center of California City Year Los Angeles Clippers Foundation SB 549 Page 10 College Tract Donor Network West Giants Community Fund Girls Incorporated of Orange County Impact Foundation Junior Blind Kings Care Foundation LA Clippers LA Galaxy LA Galaxy Foundation LA Kings LEAP Los Angeles Angels of Anaheim Los Angeles Boys and Girls Club Los Angeles Dodgers Los Angeles Dodgers Foundation Los Angeles Fund for Public Education Michael Ottolini AMVETS Post 40 Sonoma County Military Officers Association of America, Alta Chapter Military Officers Association of America, Solano County Chapter Orangewood Children's Foundation Orthopaedic Institute for Children The Pacific Club IMPACT Foundation Padres Foundation P.F. Breese Foundation Rancho Cordova Police Activities League 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 Spark Los Angeles South County Outreach Teach for America - Los Angeles United Way California Capital Region University of Southern California Veterans of Foreign Wars of California 1st District Veterans of Foreign Wars, Department of California Veterans of Foreign War Post 2275 SB 549 Page 11 Veteran Tickets Foundation VFW Post 3787, Mission Valley San Diego VFW Post 5431 Vietnam Veterans of America, Chapter #223 Vision to Learn Weave, Inc. OPPOSITION: (Verified9/2/15) California Coalition Against Gambling Expansion California Society of Association Executives California Tribal Business Alliance CalNonprofits Habematolel Pomo of Upper Lake Lytton Rancheria of California Pala Band of Mission Indians Yocha Dehe Wintun Nation Viejas Band of Kumeyaay Indians 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, SB 549 creates 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 SB 549 Page 12 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. ASSEMBLY FLOOR: 64-7, 9/2/15 AYES: Achadjian, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brown, Burke, Calderon, Campos, Chang, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gipson, Gomez, Gray, Grove, Hadley, Roger Hernández, Irwin, Jones, Jones-Sawyer, Kim, Levine, Linder, Lopez, Low, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Ridley-Thomas, Rodriguez, Salas, Steinorth, Mark Stone, Thurmond, Wagner, Waldron, Weber, Wilk, Wood, Atkins NOES: Gatto, Gonzalez, Gordon, Lackey, Maienschein, Ting, Williams NO VOTE RECORDED: Alejo, Brough, Chau, Frazier, Harper, Holden, Nazarian, Rendon, Santiago Prepared by:Felipe Lopez / G.O. / (916) 651-1530 9/15/15 9:13:49 **** END ****