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Key: (1) language to be deleted (2) new language

                            CHAPTER 322-S.F.No. 2911 
                  An act relating to lawful gambling; allowing 
                  expenditures as lawful purposes of compliance with the 
                  Americans with Disabilities Act; authorizing 
                  organizations to make certain expenditures and 
                  contributions through electronic fund transfers; 
                  allowing an employee to participate in lawful gambling 
                  under certain circumstances; allowing locally 
                  administered funds receiving contributions from 
                  gambling profits to be spent for certain public safety 
                  purposes; amending Minnesota Statutes 1996, sections 
                  349.168, subdivision 6; 349.19, subdivision 3; and 
                  349.213, subdivision 1; Minnesota Statutes 1997 
                  Supplement, sections 349.12, subdivision 25; 349.154, 
                  subdivision 2; and 349.18, subdivision 1. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
           Section 1.  Minnesota Statutes 1997 Supplement, 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 an individual or family suffering 
        from poverty, homelessness, or physical or mental disability, 
        which is used to relieve the effects of that poverty, 
        homelessness, or disability; 
           (3) a contribution to an individual for treatment for 
        delayed posttraumatic stress syndrome or a contribution to a 
        program recognized by the Minnesota department of human services 
        for the education, prevention, or treatment of compulsive 
        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 a scholarship fund 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 humanitarian or 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 occasion 
        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; or 
           (ii) members of an organization solely for services 
        performed by the members at funeral 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, subdivisions 1, 
        4, 5, and 6, 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 wholly owned by the licensed 
        organization paying the taxes, not to exceed: 
           (i) for premises used for bingo, the amount that an 
        organization may expend under board rules on rent for bingo; and 
           (ii) $35,000 per year for premises used for other forms of 
        lawful gambling; 
           (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 one-half of the reasonable costs of an 
        audit required in section 297E.06, subdivision 4; 
           (13) a contribution to or expenditure on a wildlife 
        management project that benefits the public at-large, provided 
        that the state agency with authority over that wildlife 
        management project approves the project before the contribution 
        or expenditure is made; 
           (14) expenditures, approved by the commissioner of natural 
        resources, by an organization for grooming and maintaining 
        snowmobile trails that are (1) grant-in-aid trails established 
        under section 85.019, or (2) other trails open to public use, 
        including purchase or lease of equipment for this purpose; or 
           (15) conducting nutritional programs, food shelves, and 
        congregate dining programs primarily for persons who are age 62 
        or older or disabled. 
           (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 natural disaster, 
        provided that the expenditure may be only for that part of the 
        replacement cost not reimbursed by insurance; or (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. 2.  Minnesota Statutes 1997 Supplement, section 
        349.154, subdivision 2, is amended to read: 
           Subd. 2.  [NET PROFIT REPORTS.] (a) Each licensed 
        organization must report monthly to the board on a form 
        prescribed by the board each expenditure and contribution of net 
        profits from lawful gambling.  The reports must provide for each 
        expenditure or contribution: 
           (1) the name, address, and telephone number of the 
        recipient of the expenditure or contribution; 
           (2) the date the contribution was approved by the 
        organization; 
           (3) the date, amount, and check number or electronic 
        transfer confirmation number of the expenditure or contribution; 
           (4) a brief description of how the expenditure or 
        contribution meets one or more of the purposes in section 
        349.12, subdivision 25; and 
           (5) in the case of expenditures authorized under section 
        349.12, subdivision 25, paragraph (a), clause (7), whether the 
        expenditure is for a facility or activity that primarily 
        benefits male or female participants. 
           (b) The board shall make available to the commissioners of 
        revenue and public safety copies of reports received under this 
        subdivision and requested by them. 
           (c) The report required under this subdivision must provide 
        for a separate accounting for all expenditures made from the 
        reporting organization's tax refund or credit authorized under 
        section 297E.02, subdivision 4, paragraph (d). 
           Sec. 3.  Minnesota Statutes 1996, section 349.168, 
        subdivision 6, is amended to read: 
           Subd. 6.  [COMPENSATION PAID BY CHECK OR ELECTRONIC 
        TRANSFER.] Compensation paid by an organization in connection 
        with lawful gambling must either be:  (1) in the form of a check 
        drawn on the organization's gambling account, as specified in 
        section 349.19, and paid directly to the person being 
        compensated; (2) transferred electronically from the 
        organization's gambling account, as specified in section 349.19, 
        subdivision 3, directly to the employee's bank account; or (3) 
        transferred electronically to and from the account of a payroll 
        processing firm for payment to the employee's account and for 
        the payment of local, state, and federal withholding taxes, 
        provided that the payroll processing firm is (i) currently 
        registered with and meets the criteria of the department of 
        revenue as a third-party bulk filer under section 290.92, 
        subdivision 30, (ii) is able to provide proof of a third-party 
        audit and an annual report and statement of financial condition, 
        (iii) is able to provide evidence of a fidelity bond, and (iv) 
        can provide proof of having been in business as a third-party 
        bulk filer for the most recent three years. 
           Sec. 4.  Minnesota Statutes 1997 Supplement, section 
        349.18, subdivision 1, is amended to read: 
           Subdivision 1.  [LEASE OR OWNERSHIP REQUIRED.] (a) An 
        organization may conduct lawful gambling only on premises it 
        owns or leases.  Leases must be on a form prescribed by the 
        board.  Except for leases entered into before August 1, 1994, 
        the term of the lease may not begin before the effective date of 
        the premises permit and must expire on the same day that the 
        premises permit expires.  Copies of all leases must be made 
        available to employees of the board and the division of alcohol 
        and gambling enforcement on request.  A lease may not provide 
        for payments determined directly or indirectly by the receipts 
        or profits from lawful gambling.  The board may prescribe by 
        rule limits on the amount of rent which an organization may pay 
        to a lessor for premises leased for lawful gambling provided 
        that no rule of the board may prescribe a limit of less than 
        $1,000 per month on rent paid for premises used for lawful 
        gambling other than bingo.  Any rule adopted by the board 
        limiting the amount of rent to be paid may only be effective for 
        leases entered into, or renewed, after the effective date of the 
        rule. 
           (b) No person, distributor, manufacturer, lessor, or 
        organization other than the licensed organization leasing the 
        space may conduct any activity other than the sale or serving of 
        food and beverages on the leased premises during times when 
        lawful gambling is being conducted on the premises. 
           (c) At a site where the leased premises consists of an area 
        on or behind a bar at which alcoholic beverages are sold and 
        employees of the lessor are employed by the organization as 
        pull-tab sellers at the site, pull-tabs and tipboard tickets may 
        be sold and redeemed by those employees at any place on or 
        behind the bar, but the tipboards and receptacles for pull-tabs 
        and cash drawers for lawful gambling receipts must be maintained 
        only within the leased premises. 
           (d) Employees of a lessor may participate in lawful 
        gambling on the premises provided (1) if pull-tabs or tipboards 
        are sold, the organization voluntarily posts, or is required to 
        post, the major prizes as specified in section 349.172; and (2) 
        any employee of the lessor participating in lawful gambling is 
        not a gambling employee for the organization conducting lawful 
        gambling on the premises. 
           (e) A gambling employee may purchase pull-tabs at the site 
        of the employee's place of employment provided: 
           (1) the organization voluntarily posts, or is required to 
        post, the major prizes for pull-tab or tipboard games as 
        specified in section 349.172; and 
           (2) the employee is not involved in the sale of pull-tabs 
        at that site. 
           Sec. 5.  Minnesota Statutes 1996, section 349.19, 
        subdivision 3, is amended to read: 
           Subd. 3.  [EXPENDITURES.] (a) All expenditures of gross 
        profits from lawful gambling must be itemized as to payee, 
        purpose, amount, and date of payment, and must be in compliance 
        with section 349.154.  Authorization of the expenditures must be 
        recorded in the monthly meeting minutes of the licensed 
        organization.  Checks for expenditures of gross profits must be 
        signed by at least two persons authorized by board rules to sign 
        the checks.  Expenditures of gross profits from lawful gambling 
        for local, state, and federal taxes as identified in section 
        349.12, subdivision 25, paragraph (a), clause (8), may be:  (1) 
        transferred electronically from the organization's gambling 
        account directly to bank accounts identified by local, state, or 
        federal agencies if the organization's gambling account monthly 
        bank statement specifically identifies the payee by name, the 
        amount transferred, the account number of the account into which 
        the funds were transferred, and the date of the transaction; or 
        (2) transferred electronically to and from the account of a 
        payroll processing firm that meets the criteria for such a firm 
        established under section 349.168, subdivision 6.  Expenditures 
        of gross profits from lawful gambling as authorized by section 
        349.15, subdivision 1, for utility payments may be transferred 
        electronically from the organization's gambling account directly 
        to bank accounts identified by the utility vendor if the 
        organization's gambling account monthly bank statement 
        specifically identifies the payee by name, the amount 
        transferred, the account number of the account into which the 
        funds were transferred, and the date of the transaction.  
        Electronic payments of local, state, and federal taxes and 
        utility payments are permitted only if they have been authorized 
        by the membership, the organization maintains supporting 
        documentation, and the expenditures can be verified. 
           (b) Expenditures authorized by the board according to 
        section 349.12, subdivision 25, paragraph (b), clause (3), must 
        be 51 percent completed within two years of the date of board 
        approval.  "Fifty-one percent completed" means that the work 
        completed must represent at least 51 percent of the value of the 
        project as documented by the contractor or vendor.  An 
        organization that fails to comply with this paragraph shall 
        reapply to the board for approval of the project. 
           Sec. 6.  Minnesota Statutes 1996, section 349.213, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [LOCAL REGULATION.] (a) A statutory or home 
        rule city or county has the authority to adopt more stringent 
        regulation of lawful gambling within its jurisdiction, including 
        the prohibition of lawful gambling, and may require a permit for 
        the conduct of gambling exempt from licensing under section 
        349.166.  The fee for a permit issued under this subdivision may 
        not exceed $100.  The authority granted by this subdivision does 
        not include the authority to require a license or permit to 
        conduct gambling by organizations or sales by distributors 
        licensed by the board.  The authority granted by this 
        subdivision does not include the authority to require an 
        organization to make specific expenditures of more than ten 
        percent from its net profits derived from lawful gambling.  For 
        the purposes of this subdivision, net profits are gross profits 
        less amounts expended for allowable expenses and paid in taxes 
        assessed on lawful gambling.  A statutory or home rule charter 
        city or a county may not require an organization conducting 
        lawful gambling within its jurisdiction to make an expenditure 
        to the city or county as a condition to operate within that city 
        or county, except as authorized under section 349.16, 
        subdivision 8, or 297E.02; provided, however, that an ordinance 
        requirement that such organizations must contribute ten percent 
        of their net profits derived from lawful gambling conducted at 
        premises within the city's or county's jurisdiction to a fund 
        administered and regulated by the responsible local unit of 
        government without cost to such fund, for disbursement by the 
        responsible local unit of government of the receipts for (i) 
        lawful purposes, or (ii) police, fire, and other emergency or 
        public safety-related services, equipment, and training, 
        excluding pension obligations, is not considered an expenditure 
        to the city or county nor a tax under section 297E.02, and is 
        valid and lawful.  A city or county making expenditures 
        authorized under this paragraph must by March 15 of each year 
        file a report with the board, on a form the board prescribes, 
        that lists all such revenues collected and expenditures for the 
        previous calendar year. 
           (b) A statutory or home rule city or county may by 
        ordinance require that a licensed organization conducting lawful 
        gambling within its jurisdiction expend all or a portion of its 
        expenditures for lawful purposes on lawful purposes conducted or 
        located within the city's or county's trade area.  Such an 
        ordinance must be limited to lawful purpose expenditures of 
        gross profits derived from lawful gambling conducted at premises 
        within the city's or county's jurisdiction, must define the 
        city's or county's trade area, and must specify the percentage 
        of lawful purpose expenditures which must be expended within the 
        trade area.  A trade area defined by a city under this 
        subdivision must include each city contiguous to the defining 
        city. 
           (c) A more stringent regulation or prohibition of lawful 
        gambling adopted by a political subdivision under this 
        subdivision must apply equally to all forms of lawful gambling 
        within the jurisdiction of the political subdivision, except a 
        political subdivision may prohibit the use of paddlewheels. 
           Sec. 7.  [EFFECTIVE DATE.] 
           This act is effective the day following final enactment. 
           Presented to the governor March 20, 1998 
           Signed by the governor March 23, 1998, 10:55 a.m.

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