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Minnesota Legislature

Office of the Revisor of Statutes

HF 2253

as introduced - 86th Legislature (2009 - 2010) Posted on 02/09/2010 02:01am

KEY: stricken = removed, old language.
underscored = added, new language.

Bill Text Versions

Engrossments
Introduction Posted on 04/01/2009

Current Version - as introduced

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A bill for an act
relating to taxes; modifying provisions relating to lawful gambling taxes;
amending Minnesota Statutes 2008, sections 297E.01, subdivisions 7, 8;
297E.02, subdivisions 1, 2, 3, 7, 10; 297E.13, subdivision 5; 349.12, subdivision
25; 349.19, subdivision 2; repealing Minnesota Statutes 2008, sections 297E.02,
subdivisions 4, 6, 11; 349.15, subdivision 3; 349.19, subdivision 2a.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2008, section 297E.01, subdivision 7, is amended to read:


Subd. 7.

Gambling product.

"Gambling product" means bingo hard cards, bingo
paper sheets, new text beginfacsimiles of bingo paper sheets, new text endor linked bingo paper sheets; pull-tabs;
tipboards; paddle tickets and paddle ticket cards; raffle tickets; or any other ticket, card,
board, placard, device, or token that represents a chance, for which consideration is paid,
to win a prize.

Sec. 2.

Minnesota Statutes 2008, section 297E.01, subdivision 8, is amended to read:


Subd. 8.

Gross receipts.

"Gross receipts" means all receipts derived from lawful
gambling activity including, but not limited to, the following items:

(1) gross sales of bingo hard cards and paper sheets before reduction for prizes,
expenses, shortages, free plays, or any other charges or offsets;

(2) the ideal gross of pull-tab and tipboard deals or games less the value of unsold
and defective tickets and before reduction for prizes, expenses, shortages, free plays,
or any other charges or offsets;

(3) gross sales of raffle tickets and paddle tickets before reduction for prizes,
expenses, shortages, free plays, or any other charges or offsets;

(4) admission, commission, cover, or other charges imposed on participants in
lawful gambling activity as a condition for or cost of participation; and

(5) interest, dividends, annuities, profit from transactions, or other income derived
from the accumulation or use of gambling proceeds.

Gross receipts does not includenew text begin rentalnew text end proceeds from deleted text beginrental under section 349.18,
subdivision 3
deleted text endnew text begin premises owned by an organization and leased to one or more other
organizations for the purposes of conducting lawful gambling
new text end.

Sec. 3.

Minnesota Statutes 2008, section 297E.02, subdivision 1, is amended to read:


Subdivision 1.

Imposition.

new text begin(a) new text endA tax is imposed on all lawful gambling deleted text beginother than
(1) pull-tab deals or games; (2) tipboard deals or games; and (3) items listed in section
297E.01, subdivision 8, clauses (4) and (5),
deleted text end at the rate of deleted text begin8.5deleted text endnew text begin 3.75new text end percent on the gross
receipts as defined in section 297E.01, subdivision 8deleted text begin, less prizes actually paiddeleted text end.

new text begin (b)new text end The tax imposed by this subdivision is in lieu of the tax imposed by section
297A.62 and all local taxes deleted text beginand license feesdeleted text endnew text begin,new text end except a new text beginlocal investigation new text endfee authorized
under section 349.16, subdivision 8, deleted text beginor a tax authorized under subdivision 5deleted text endnew text begin or a local
gambling tax authorized under section 349.213, subdivision 3
new text end.

new text begin (c) new text endThe tax imposed under this subdivision is payable by the organization or party
conducting, directly or indirectly, the gambling.

new text begin (d) The liability for the tax imposed by this section is incurred when the gambling
product is received by a customer from a licensed distributor.
new text end

Sec. 4.

Minnesota Statutes 2008, section 297E.02, subdivision 2, is amended to read:


Subd. 2.

deleted text beginTax-exempt gamblingdeleted text endnew text begin Exemptions from taxnew text end.

new text begin The tax imposed by this
section is not imposed on the following:
new text end

new text begin (1) new text endan organization's receipts from lawful gambling that are excluded or exempt
from licensing under section 349.166, are not subject to the tax imposed by this section or
section 297A.62. This exclusion from tax is only valid if at the time of the event giving rise
to the tax the organization either has an exclusion under section 349.166, subdivision 1, or
has applied for and received a valid exemption from the lawful gambling control boarddeleted text begin.deleted text endnew text begin;
new text end

new text begin (2) sales to the governing body of an Indian tribal organization for use on an Indian
reservation;
new text end

new text begin (3) sales to distributors licensed under the laws of another state or of a province of
Canada, as long as all statutory and regulatory requirements are met in the other state or
province; and
new text end

new text begin (4) sales of promotional tickets as defined in section 349.12.
new text end

Sec. 5.

Minnesota Statutes 2008, section 297E.02, subdivision 3, is amended to read:


Subd. 3.

Collection; disposition.

new text begin(a) new text endTaxes imposed by this section deleted text beginother than in
subdivision 4
deleted text endnew text begin and the monthly regulatory fee required under chapter 349new text end are due and
payable to the commissioner deleted text beginwhendeleted text endnew text begin withnew text end the gambling tax return new text beginthat new text endis required to be
fileddeleted text begin. Taxes imposed by subdivision 4 are due and payable to the commissioner on or
before the last business day of the month following the month in which the taxable sale
was made. Returns covering the taxes imposed under this section must be filed with the
commissioner
deleted text end on or before the 20th day of the month following the close of deleted text beginthe previous
calendar month
deleted text endnew text begin or last sale of a lawful gambling gamenew text end.

new text begin (b)new text end The commissioner may require that the returns be filed via magnetic media or
electronic data transfer.

new text begin (c)new text end The deleted text beginproceeds, along with the revenue received from all license fees and other
fees under sections 349.11 to 349.191, 349.211, and 349.213,
deleted text endnew text begin taxes received under this
section
new text end must be paid to the commissioner of finance for deposit in the general fund.

new text begin (d) The monthly regulatory fee received under this section must be deposited in the
lawful gambling regulation account in the special revenue fund according to section
349.151.
new text end

Sec. 6.

Minnesota Statutes 2008, section 297E.02, subdivision 7, is amended to read:


Subd. 7.

deleted text beginUntaxeddeleted text end new text beginTax on illegal or lost new text endgambling product.

(a) In addition to
penalties or criminal sanctions imposed by this chapter, a person, organization, or business
entity possessingnew text begin, playing,new text end or selling a pull-tab or tipboard deleted text beginupon which the tax imposed by
subdivision 4 has not been paid
deleted text end new text beginfor which:
new text end

new text begin (1) they are not authorized under chapter 349 to have in their possession;
new text end

new text begin (2) they do not possess a valid invoice from a licensed distributor; or
new text end

new text begin (3) the game does not conform with the standards as set forth in chapter 349,
including the bar code information;
new text end

is liable for a tax of six percent of the ideal gross of each pull-tab or tipboard. The tax
on a partial deal must be assessed as if it were a full deal.

(b) In addition to penalties and criminal sanctions imposed by this chapter, a person
not licensed by the board who conducts bingo, raffles, or paddle wheel games is liable for
a tax of six percent of the gross receipts from that activity.

(c)new text begin In addition to penalties or criminal sanctions imposed by this chapter, a licensed
organization or a licensed distributor is liable for a tax of 3.75 percent of the ideal gross
receipts for lawful gambling equipment registered with the state in inventory but later
found to be missing or lost.
new text end

new text begin (d) new text endThe tax must be assessed by the commissioner. An assessment must be
considered a jeopardy assessment or jeopardy collection as provided in section 270C.36.
The commissioner shall assess the tax based on personal knowledge or information
available to the commissioner. The commissioner shall mail to the taxpayer at the
taxpayer's last known address, or serve in person, a written notice of the amount of tax,
demand its immediate payment, and, if payment is not immediately made, collect the tax
by any method described in chapter 270C, except that the commissioner need not await the
expiration of the times specified in chapter 270C. The tax assessed by the commissioner
is presumed to be valid and correctly determined and assessed. The burden is upon the
taxpayer to show its incorrectness or invalidity. The tax imposed under this subdivision
does not apply to gambling that is exempt from taxation under subdivision 2.

Sec. 7.

Minnesota Statutes 2008, section 297E.02, subdivision 10, is amended to read:


Subd. 10.

Refunds; appropriation.

new text begin(a) new text endA person who has, under this chapter, paid
to the commissioner an amount of tax for a period in excess of the amount legally due for
that period, may file with the commissioner a claim for a refund of the excess.

new text begin (b) An organization licensed under section 349.16 may file with the commissioner a
claim for a refund or credit of taxes paid under subdivision 1 if the organization's gross
receipts for the previous calendar year were $100,000 or less. Organizations claiming a
refund or credit with less than 12 months of activity from the previous calendar year will
be evaluated on a prorated basis. The refund or credit provided under this section must be
filed as part of the organization's February monthly tax return.
new text end

new text begin (c)new text end The amount necessary to pay the refunds under this subdivision deleted text beginand subdivision
4, paragraph (d),
deleted text end is appropriated from the general fund to the commissioner.

Sec. 8.

Minnesota Statutes 2008, section 297E.13, subdivision 5, is amended to read:


Subd. 5.

Untaxed gambling equipment.

It is a gross misdemeanor for a person
to possess gambling equipment for resale in this state that has not been stamped or
bar-coded in accordance with this chapter and chapter 349 new text beginand in compliance with section
297E.02, subdivision 7,
new text endand upon which the taxes imposed by chapter 297A or section
297E.02, subdivision 4, have not been paid. The director of alcohol and gambling
enforcement or the commissioner or the designated inspectors and employees of the
director or commissioner may seize in the name of the state of Minnesota any unregistered
deleted text begin or untaxeddeleted text end gambling equipment.

Sec. 9.

Minnesota Statutes 2008, section 349.12, subdivision 25, is amended to read:


Subd. 25.

Lawful purpose.

(a) "Lawful purpose" means one or more of the
following:

(1) any expenditure by or contribution to a 501(c)(3) or festival organization, as
defined in subdivision 15a, provided that the organization and expenditure or contribution
are in conformity with standards prescribed by the board under section 349.154, which
standards must apply to both types of organizations in the same manner and to the same
extent;

(2) a contribution to or expenditure for goods and services for an individual or
family suffering from poverty, homelessness, or disability, which is used to relieve the
effects of that suffering;

(3) a contribution to a program recognized by the Minnesota Department of Human
Services for the education, prevention, or treatment of problem gambling;

(4) a contribution to or expenditure on a public or private nonprofit educational
institution registered with or accredited by this state or any other state;

(5) a contribution to an individual, public or private nonprofit educational institution
registered with or accredited by this state or any other state, or to a scholarship fund of a
nonprofit organization whose primary mission is to award scholarships, for defraying the
cost of education to individuals where the funds are awarded through an open and fair
selection process;

(6) activities by an organization or a government entity which recognize military
service to the United States, the state of Minnesota, or a community, subject to rules
of the board, provided that the rules must not include mileage reimbursements in the
computation of the per diem reimbursement limit and must impose no aggregate annual
limit on the amount of reasonable and necessary expenditures made to support:

(i) members of a military marching or color guard unit for activities conducted
within the state;

(ii) members of an organization solely for services performed by the members at
funeral services;

(iii) members of military marching, color guard, or honor guard units may be
reimbursed for participating in color guard, honor guard, or marching unit events within
the state or states contiguous to Minnesota at a per participant rate of up to $35 per diem; or

(iv) active military personnel and their immediate family members in need of
support services;

(7) recreational, community, and athletic facilities and activities intended primarily
for persons under age 21, provided that such facilities and activities do not discriminate on
the basis of gender and the organization complies with section 349.154;

(8) payment of local taxes authorized under this chapter, taxes imposed by the
United States on receipts from lawful gambling, the taxes imposed by section 297E.02,
deleted text begin subdivisionsdeleted text endnew text begin subdivisionnew text end 1, deleted text begin4, 5, and 6,deleted text end and the tax imposed on unrelated business income
by section 290.05, subdivision 3;

(9) payment of real estate taxes and assessments on permitted gambling premises
owned by the licensed organization paying the taxes, or wholly leased by a licensed
veterans organization under a national charter recognized under section 501(c)(19) of the
Internal Revenue Code;

(10) a contribution to the United States, this state or any of its political subdivisions,
or any agency or instrumentality thereof other than a direct contribution to a law
enforcement or prosecutorial agency;

(11) a contribution to or expenditure by a nonprofit organization which is a church
or body of communicants gathered in common membership for mutual support and
edification in piety, worship, or religious observances;

(12) payment of the reasonable costs of an audit required in section 297E.06,
subdivision 4, provided the annual audit is filed in a timely manner with the Department of
Revenue and paid prior to June 30, 2006;

(13) a contribution to or expenditure on projects or activities approved by the
commissioner of natural resources for:

(i) wildlife management projects that benefit the public at large;

(ii) grant-in-aid trail maintenance and grooming established under sections 84.83
and 84.927, and other trails open to public use, including purchase or lease of equipment
for this purpose; and

(iii) supplies and materials for safety training and educational programs coordinated
by the Department of Natural Resources, including the Enforcement Division;

(14) conducting nutritional programs, food shelves, and congregate dining programs
primarily for persons who are age 62 or older or disabled;

(15) a contribution to a community arts organization, or an expenditure to sponsor
arts programs in the community, including but not limited to visual, literary, performing,
or musical arts;

(16) an expenditure by a licensed fraternal organization or a licensed veterans
organization for payment of water, fuel for heating, electricity, and sewer costs for a
building wholly owned or wholly leased by and used as the primary headquarters of the
licensed veterans organization or fraternal organization;

(17) expenditure by a licensed veterans organization of up to $5,000 in a calendar
year in net costs to the organization for meals and other membership events, limited to
members and spouses, held in recognition of military service. No more than $5,000 can be
expended in total per calendar year under this clause by all licensed veterans organizations
sharing the same veterans post home;

(18) payment of fees authorized under this chapter imposed by the state of Minnesota
to conduct lawful gambling in Minnesota; or

(19) a contribution or expenditure to honor an individual's humanitarian service
as demonstrated through philanthropy or volunteerism to the United States, this state,
or local community.

(b) Notwithstanding paragraph (a), "lawful purpose" does not include:

(1) any expenditure made or incurred for the purpose of influencing the nomination
or election of a candidate for public office or for the purpose of promoting or defeating a
ballot question;

(2) any activity intended to influence an election or a governmental decision-making
process;

(3) the erection, acquisition, improvement, expansion, repair, or maintenance of real
property or capital assets owned or leased by an organization, unless the board has first
specifically authorized the expenditures after finding that (i) the real property or capital
assets will be used exclusively for one or more of the purposes in paragraph (a); (ii)
with respect to expenditures for repair or maintenance only, that the property is or will
be used extensively as a meeting place or event location by other nonprofit organizations
or community or service groups and that no rental fee is charged for the use; (iii) with
respect to expenditures, including a mortgage payment or other debt service payment,
for erection or acquisition only, that the erection or acquisition is necessary to replace
with a comparable building, a building owned by the organization and destroyed or
made uninhabitable by fire or catastrophe, provided that the expenditure may be only
for that part of the replacement cost not reimbursed by insurance; (iv) with respect to
expenditures, including a mortgage payment or other debt service payment, for erection or
acquisition only, that the erection or acquisition is necessary to replace with a comparable
building a building owned by the organization that was acquired from the organization by
eminent domain or sold by the organization to a purchaser that the organization reasonably
believed would otherwise have acquired the building by eminent domain, provided
that the expenditure may be only for that part of the replacement cost that exceeds the
compensation received by the organization for the building being replaced; or (v) with
respect to an expenditure to bring an existing building into compliance with the Americans
with Disabilities Act under item (ii), an organization has the option to apply the amount of
the board-approved expenditure to the erection or acquisition of a replacement building
that is in compliance with the Americans with Disabilities Act;

(4) an expenditure by an organization which is a contribution to a parent
organization, foundation, or affiliate of the contributing organization, if the parent
organization, foundation, or affiliate has provided to the contributing organization within
one year of the contribution any money, grants, property, or other thing of value;

(5) a contribution by a licensed organization to another licensed organization unless
the board has specifically authorized the contribution. The board must authorize such a
contribution when requested to do so by the contributing organization unless it makes an
affirmative finding that the contribution will not be used by the recipient organization for
one or more of the purposes in paragraph (a); or

(6) a contribution to a statutory or home rule charter city, county, or town by a
licensed organization with the knowledge that the governmental unit intends to use the
contribution for a pension or retirement fund.

Sec. 10.

Minnesota Statutes 2008, section 349.19, subdivision 2, is amended to read:


Subd. 2.

Accounts.

Gross receipts from lawful gambling by each organization must
be segregated from all other revenues of the conducting organization and placed in a
separate account. All expenditures for expenses, taxes, and lawful purposes must be made
from the separate account except (1) in the case of expenditures previously approved
by the organization's membership for emergencies as defined by board rule,new text begin ornew text end (2) deleted text beginas
provided in subdivision 2a, or (3)
deleted text end when restricted to one electronic fund transaction for
the payment of taxes for the organization as a whole, the organization may transfer the
amount of taxes related to the conduct of gambling to the general account at the time when
due and payable. The name and address of the bank, the account number for the separate
account, and the names of organization members authorized as signatories on the separate
account must be provided to the board when the application is submitted. Changes in the
information must be submitted to the board at least ten days before the change is made.
Gambling receipts must be deposited into the gambling bank account within four business
days of completion of the bingo occasion, deal, or game from which they are received. A
deal of pull-tabs is considered complete when either the last pull-tab of the deal is sold or
the organization does not continue the play of the deal during the next scheduled period
of time in which the organization will conduct pull-tabs. A tipboard game is considered
complete when the seal on the game flare is uncovered. Deposit records must be sufficient
to allow determination of deposits made from each bingo occasion, deal, or game at each
permitted premises. The person who accounts for gambling gross receipts and profits may
not be the same person who accounts for other revenues of the organization.

Sec. 11. new text begin REPEALER.
new text end

new text begin (a) new text end new text begin Minnesota Statutes 2008, sections 297E.02, subdivisions 6 and 11; and 349.15,
subdivision 3,
new text end new text begin are repealed.
new text end

new text begin (b) new text end new text begin Minnesota Statutes 2008, sections 297E.02, subdivision 4; and 349.19,
subdivision 2a,
new text end new text begin are repealed, effective June 30, 2010.
new text end

Sec. 12. new text beginEFFECTIVE DATE.
new text end

new text begin Except as otherwise provided, sections 1 to 11 are effective January 1, 2010.
new text end