Brief ⁽¹⁾

The bill would make a number of amendments to the state's bingo laws. The major changes include:

• Eliminating the local retail sales tax from sales of bingo cards and faces (disposable paper cards). The state sales tax would continue to apply to bingo sales.



• Requiring bingo distributors, rather than nonprofit licensees, to remit the state bingo tax.



• Making the bingo tax 0.2� per bingo face instead of the current 3 percent of gross bingo income.



• Eliminating the general use of hard (reusable) bingo cards after July 1, 2003. (The 3 percent gross receipts tax would continue to be collected on revenue generated from sales of hard cards.)



• Eliminating allocation of bingo tax revenue to local units of government for bingo law enforcement purposes. All bingo taxes and fees would be deposited in the bingo regulation fund in the state treasury. Any amounts not used for bingo enforcement and problem gambling programs would be transferred to the State General Fund.



• Authorizing progressive bingo games. The initial prize in such games would be a maximum of $250. The prize could be increased by a maximum of $100 per session. The maximum progressive game prize would be $1,000. Progressive games prizes would not be counted in the general $1,200 daily prize limit. Two progressive games could be conducted during a bingo session. Those two games would count toward the 25 game per session limit.



• Authorizing mini-bingo, a new call bingo game that would be conducted during the hour prior to the start of a regular bingo session. A maximum of 12 mini-bingo games would be conducted during that hour. Prizes awarded in mini-bingo games would be the lesser of 50 percent of gross receipts for the game, or $50. The prize would not count toward the $1,200 per day prize limit. Mini-bingo would not be counted toward the existing 25 game per session limit.



• Authorizing a new instant bingo game, the winner of which would be determined by matching a letter and numbers under a tab of the instant bingo ticket with the winning number in a call bingo game during that session ("gator bingo").



• Authorizing drawings conducted by licensees. A licensee could conduct one drawing per session. The value of the prize for the drawing could not exceed $25 (non-cash prizes only). No charge could be made for participation in the drawing. Lessors and their employees and persons conducting the drawing would be prohibited from participating. Lessors would continue to be prohibited from conducting any games of chance.



• Increasing to $200 the amount of prize money that can be awarded in cash by a bingo licensee. Larger monetary prizes would have to be paid by check.



• Creating the unclassified position of Administrator of Charitable Gaming in the Department of Revenue. The person would be responsible for implementing the Bingo Act and would be appointed by and responsible to the Secretary of Revenue.



• Requiring a performance audit of the effectiveness and efficiency of the Department of Revenue's implementation and enforcement of the bingo laws during the first year the new laws are in effect. The audit results would be reported to the Post Audit Committee and the Legislature before the start of the 2002 Session.



• Establishing a fund to finance treatment of problem or compulsive gambling or to conduct studies of the effects of gambling. The grant program would be established and administered by the Department of Social and Rehabilitation Services. Annually, $100,000 would be available for the grant program. That amount would be composed of $80,000 from the State Gaming Revenue Fund and $20,000 from bingo taxes.



• Changing the transfer to the State Gaming Revenue Fund from pull tab sales from a minimum of 30 percent to a minimum of 20 percent of total sales (provisions of 1999 HB 2535).



• Allow the Lottery to award non-monetary prizes (provisions of 1999 HB 2536).



• Remove the statutory limitations on the takeout from parimutuel wagers on simulcast races (provisions of 1999 HB 2537).

Background

The bill was introduced at the end of the 1998 interim by the Special Committee on Federal and State Affairs as a means of addressing a number of concerns about collection and use of bingo tax revenue.

During the 2000 Session, the Senate Committee amended the bill, as amended by the Committee during the 1999 Session, to:

• Authorize two additional new games, mini-bingo and "gator" bingo, and drawings conducted by licensees;



• Retain the state sales tax on bingo cards, but repeal the local sales tax on those products;



• Reduce the per-face tax to 0.2� per face from 0.3� per face;



• Eliminate language that would have required all entities that conduct bingo, including Native American tribes, to collect the per-face tax from bingo players; and



• Increase the annual funding for the problem gamblers program to $100,000.

During the 1999 Session, the Senate Committee amended the House version of the bill to:

• Return to 0.3� the bingo face tax, as in the introduced version of the bill;



• Reduce the amount of prize money that can be awarded in cash by a bingo licensee to $200;



• Create the position of Administrator of Charitable Gaming;



• Require a performance audit of the effectiveness and efficiency of the Department of Revenue's implementation and enforcement of the bingo laws during the first year the new laws are in effect;



• Make numerous amendments as requested by the Department of Revenue to clarify the bingo tax collection provisions of the bill as passed by the House;



• Set aside the greater of $60,000 or 2 percent of unclaimed lottery prize money to fund treatment of and research about problem gambling;



• Change the transfer to the State Gaming Revenue Fund from pull tab sales;



• Allow the Lottery to award non-monetary prizes; and



• Remove the statutory limitations on the takeout from parimutuel wagers on simulcast races.

Conferees who presented testimony in support of the bill at the hearing before the House Committee on Federal and State Affairs included representatives of the: Kansas American Legion; Kansas Sunflower Club Association; Kansas Charities Cooperative; Elks Lodge #427, Wichita; American Legion Post 282, Wetmore; American Legion Post 5, Emporia; and two bingo distributors. Opposition to the bill was expressed by a representative of American Legion Post 17 in Manhattan.

A number of amendments to the bill were suggested by the representative of the Office of the Adjutant of the American Legion. Those suggestions were incorporated by the House Committee in the substitute bill.

The House substitute bill contained the following major differences from the original bill.

• Regulation would remain with the Department of Revenue. In the introduced version of the bill, regulation of bingo would have been moved to the Racing and Gaming Commission.



• The tax rate for call bingo paper faces would be reduced from 0.3� per face to 0.2� per face.



• The per-face bingo tax would be collected on all bingo faces sold by distributors to anyone conducting bingo games in the state. The bill would clarify that the tax is a player tax, not a tax imposed on the operator.



• As an exception to the general prohibition against the use of hard cards after July 1, 2002, the Secretary of Revenue would be authorized to adopt rules and regulations allowing the use of hard cards. Games conducted using hard cards would continue to be subject to the 3 percent gross receipts tax.



• Progressive games would be authorized and requirements for those games would be enumerated in the bill.



• The sales tax exemption would apply only to sales of bingo faces and cards by licensees.

The Division of the Budget's fiscal note on the introduced version of the bill stated that enactment of the bill would have reduced state revenue by $1.6 million in FY 2000 and $1.75 million in FY 2001. According to the fiscal note, the introduced version of the bill also would have reduced revenue to local units of government in which bingo games are conducted by approximately $275,000 statewide. The fiscal note only included analysis of the sales tax reduction. The fiscal note did not estimate any improvement in bingo tax collection as a result of enactment of the bill. The fiscal note did not address any change in expenditures that might have resulted from moving the bingo enforcement from the Department of Revenue to the Racing and Gaming Commission. The changes made in the substitute bill that could have an impact on revenue could not have been addressed in the

fiscal note.

The interim Committee's complete report is available in Committee Reports to the 1999 Kansas Legislature: Part I-Special Committees, pg. 2-10. The report also can be accessed on the Internet at: http://skyways.lib.ks.us/ksleg/KLRD/genres.html

The interim Committee's work included review of two performance audits: Reviewing the Regulatory Activities of the Division of Alcoholic Beverage Control (March 1998 No. 98-41) and Examining Bingo Tax Revenue Spending Levels By State and Local Units of Government (October 1998 No. 99-06) The Executive Summary of the former report and the full text of the latter report can be accessed on the Internet at: http://skyways.lib.ks.us/kansas/ksleg/PAUD/perf_audit/rptlist.html#TAXATION and REVENUE

1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/bill_search.html