1.1                          A bill for an act 
  1.2             relating to gambling; requiring the state lottery to 
  1.3             authorize and regulate the operation of video lottery 
  1.4             terminals at a licensed racetrack with horse racing on 
  1.5             which pari-mutuel betting is conducted; regulating the 
  1.6             use of net terminal income; providing penalties; 
  1.7             amending Minnesota Statutes 1996, section 297A.259; 
  1.8             proposing coding for new law in Minnesota Statutes, 
  1.9             chapter 349A. 
  1.10  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.11     Section 1.  Minnesota Statutes 1996, section 297A.259, is 
  1.12  amended to read: 
  1.13     297A.259 [LOTTERY TICKETS; IN LIEU TAX.] 
  1.14     Sales of state lottery tickets and gross receipts from 
  1.15  video lottery terminals operated by the state lottery are exempt 
  1.16  from the tax imposed under section 297A.02.  The state lottery 
  1.17  must on or before the 20th day of each month transmit to the 
  1.18  commissioner of revenue an amount equal to: 
  1.19     (1) the gross receipts from the sale of lottery tickets for 
  1.20  the previous month multiplied by the ~~combined~~ tax rate under 
  1.21  ~~sections~~ section 297A.02, subdivision 1~~,~~; and ~~297A.021,~~ 
  1.22  ~~subdivision 1~~ 
  1.23     (2) the gross receipts from video lottery terminals 
  1.24  operated by the state lottery less prizes paid out on those 
  1.25  terminals.  
  1.26     The resulting payment is in lieu of the sales tax that 
  1.27  otherwise would be imposed by this chapter.  The commissioner 
  2.1   shall deposit the money transmitted as provided by section 
  2.2   297A.44 and the money must be treated as other proceeds of the 
  2.3   sales tax.  Gross receipts for purposes of this section mean the 
  2.4   proceeds of the sale of tickets before deduction of a commission 
  2.5   or other compensation paid to the vendor or retailer for selling 
  2.6   tickets. 
  2.7      Sec. 2.  [349A.16] [DEFINITIONS.] 
  2.8      Subdivision 1.  [APPLICATION.] The definitions in this 
  2.9   subdivision apply to sections 349A.16 to 349A.25. 
  2.10     Subd. 2.  [CREDIT RECEIPT.] "Credit receipt" means a 
  2.11  receipt generated by a video lottery terminal that provides 
  2.12  evidence of cash payment due a player from play on a video 
  2.13  lottery terminal. 
  2.14     Subd. 3.  [DIRECTOR.] "Director" is the director of the 
  2.15  state lottery. 
  2.16     Subd. 4.  [LOTTERY.] "Lottery" is the state lottery 
  2.17  authorized in this chapter. 
  2.18     Subd. 5.  [VIDEO LOTTERY LICENSEE.] "Video lottery licensee"
  2.19  means the holder of a class A license under chapter 240 and at 
  2.20  whose facility live racing is conducted annually. 
  2.21     Subd. 6.  [NET TERMINAL INCOME.] "Net terminal income" 
  2.22  means the sum of all money spent for video lottery terminal 
  2.23  plays less the amount paid out to winning players. 
  2.24     Subd. 7.  [VIDEO LOTTERY GAME.] "Video lottery game" means 
  2.25  electronically simulated games authorized by the director that 
  2.26  are displayed and played on a video lottery terminal for 
  2.27  consideration and with prizes awarded for designated results.  
  2.28     Subd. 8.  [VIDEO LOTTERY TERMINAL.] "Video lottery terminal"
  2.29  means an electronic machine that, upon the insertion of a coin, 
  2.30  token, or currency, is available to play or simulate the play of 
  2.31  a game using a video display and microprocessors in which the 
  2.32  player may receive free plays or credits that can be redeemed 
  2.33  for cash.  
  2.34     Subd. 9.  [VIDEO LOTTERY TERMINAL PLAY.] "Video lottery 
  2.35  terminal play" means an electronic record that proves 
  2.36  participation in a video lottery game. 
  3.1      Sec. 3.  [349A.17] [VENDOR CONTRACTS FOR VIDEO LOTTERY 
  3.2   TERMINALS.] 
  3.3      The director may enter into contracts for the procurement 
  3.4   of video lottery terminals, or any other contract necessary for 
  3.5   the maintenance or monitoring of video lottery terminals.  In 
  3.6   entering into a contract under this section, the director must 
  3.7   comply with the requirements of section 349A.07. 
  3.8      Sec. 4.  [349A.18] [VIDEO LOTTERY LICENSEE.] 
  3.9      Subdivision 1.  [LICENSES.] The director shall license the 
  3.10  video lottery licensee to operate video lottery terminals. 
  3.11     Subd. 2.  [BOND.] The director shall require the video 
  3.12  lottery licensee to post a bond, securities, or an irrevocable 
  3.13  letter of credit, in an amount the director deems necessary to 
  3.14  protect the interests of the state.  The bond, securities, or 
  3.15  letter of credit must be of a form prescribed under section 
  3.16  349A.06, subdivision 3. 
  3.17     Subd. 3.  [RESTRICTIONS.] (a) The video lottery licensee 
  3.18  may have video lottery terminals placed only at the racetrack 
  3.19  for which the class A license under chapter 240 was issued. 
  3.20     (b) The video lottery licensee may have up to 1,500 video 
  3.21  lottery terminals at its facility as determined by the director. 
  3.22     (c) The video lottery licensee shall keep a complete set of 
  3.23  books of account, correspondence, and all other records 
  3.24  necessary to show fully the video lottery licensee's lottery 
  3.25  transactions, and make them available for inspection by 
  3.26  employees of the lottery at all times during business hours.  
  3.27  The director may require the video lottery licensee to furnish 
  3.28  information the director considers necessary to carry out the 
  3.29  purposes of sections 349A.16 to 349A.25 and may require an audit 
  3.30  to be made of the books of account and records.  The director 
  3.31  may select an auditor to perform the audit and may require the 
  3.32  video lottery licensee to pay the cost of the audit.  The 
  3.33  auditor has the same right of access to the books of account, 
  3.34  correspondence, and other records as is given to employees of 
  3.35  the lottery. 
  3.36     (d) The license issued under this section may not be 
  4.1   transferred or assigned. 
  4.2      (e) The video lottery licensee shall prominently post in 
  4.3   the area where video lottery terminals are located, in a manner 
  4.4   provided by the commissioner of human services, the toll-free 
  4.5   telephone number established by the commissioner of human 
  4.6   services in connection with the compulsive gambling program 
  4.7   established under section 245.98. 
  4.8      (f) The video lottery licensee shall prominently display 
  4.9   the license issued by the director at its facility. 
  4.10     (g) The director, or any employee of the lottery, may 
  4.11  inspect any video lottery terminal at any time during normal 
  4.12  business hours without notice to ensure compliance with sections 
  4.13  349A.16 to 349A.25. 
  4.14     Subd. 4.  [LOCAL LICENSES.] No political subdivision may 
  4.15  require a local license to operate as a video lottery licensee, 
  4.16  restrict or regulate the placement of a video lottery terminal, 
  4.17  or impose a tax or fee on the business of operating as a video 
  4.18  lottery licensee.  
  4.19     Subd. 5.  [PROCEEDS OF SALES.] All proceeds from the sale 
  4.20  of video lottery terminal plays received by the video lottery 
  4.21  licensee constitute a trust fund until paid to the director.  
  4.22  The video lottery licensee is personally liable for all proceeds.
  4.23     Subd. 6.  [REVOCATION, SUSPENSION, OR REFUSAL TO RENEW 
  4.24  LICENSE.] The director may revoke, suspend, or refuse to renew a 
  4.25  license issued under this section if the video lottery licensee 
  4.26  violates any provision of sections 349A.16 to 349A.25 or for any 
  4.27  reason specified under section 349A.06, subdivision 11.  The 
  4.28  director may temporarily suspend a license under this section 
  4.29  under the procedures in section 349A.06, subdivision 11, 
  4.30  paragraph (e). 
  4.31     Sec. 5.  [349A.19] [VIDEO LOTTERY TERMINALS.] 
  4.32     Subdivision 1.  [SPECIFICATIONS.] Each video lottery 
  4.33  terminal must: 
  4.34     (1) maintain on nonresettable meters a permanent record, 
  4.35  capable of being printed out, of all transactions by the 
  4.36  terminal and all entries into the terminal; and 
  5.1      (2) be capable of being linked electronically to a central 
  5.2   communication system to provide auditing program information as 
  5.3   required by the director.  
  5.4      Subd. 2.  [LIMIT ON AMOUNT PLAYED.] A video lottery 
  5.5   terminal may not allow less than 25 cents to be played on a 
  5.6   single game. 
  5.7      Subd. 3.  [PAYOUT PERCENTAGE.] The overall payout 
  5.8   percentage for a game on a video lottery terminal must be at 
  5.9   least 80 percent and not more than 95 percent. 
  5.10     Subd. 4.  [EXAMINATION OF TERMINALS.] The director shall 
  5.11  examine prototypes of video lottery terminals to be used under 
  5.12  sections 349A.16 to 349A.25.  The director shall require that 
  5.13  the manufacturer of the terminal pay the cost of the 
  5.14  examination.  The director may contract for the examination of 
  5.15  video lottery terminals. 
  5.16     Subd. 5.  [TESTING OF TERMINALS.] The director may require 
  5.17  working models of a video lottery terminal transported to the 
  5.18  location the director designates for testing, examination, and 
  5.19  analysis.  The manufacturer shall pay all costs of any testing, 
  5.20  examination, analysis, and transportation of the terminal model. 
  5.21     Subd. 6.  [DEACTIVATION OF TERMINAL.] The director may 
  5.22  deactivate a video lottery terminal without notice if the video 
  5.23  lottery licensee has violated any provision of sections 349A.16 
  5.24  to 349A.25 or provision of its contract with the director. 
  5.25     Subd. 7.  [EMPLOYMENT.] Five percent of the employees hired 
  5.26  by the video lottery licensee must be recipients of public 
  5.27  assistance or in transition off of public assistance.  
  5.28     Sec. 6.  [349A.20] [VIDEO LOTTERY PRIZES.] 
  5.29     Subdivision 1.  [AGREEMENT BY PLAYERS.] A person who plays 
  5.30  a video lottery terminal agrees to be bound by the rules and 
  5.31  game procedures applicable to that particular video lottery 
  5.32  game.  The player acknowledges that the determination of whether 
  5.33  the credit receipt is valid is subject to the rules and game 
  5.34  procedures adopted by the director, claims procedures 
  5.35  established by the director for that game, and any confidential 
  5.36  or public validation tests established by the director for that 
  6.1   game.  
  6.2      Subd. 2.  [PRIZES CLAIMED BY PERSONS UNDER 18.] A person 
  6.3   under 18 years of age may not claim a prize from the operation 
  6.4   of a video lottery terminal. 
  6.5      Subd. 3.  [PAYMENT; UNCLAIMED PRIZES.] A credit receipt 
  6.6   must be presented for payment before the close of business on 
  6.7   the date the credit receipt was printed.  If a valid claim is 
  6.8   not made for a prize by the end of this period, the unclaimed 
  6.9   prize must be paid by the video lottery licensee to the 
  6.10  lottery.  A prize won by a person who is ineligible to be 
  6.11  awarded a prize under sections 349A.16 to 349A.25 must be 
  6.12  treated as an unclaimed prize under this subdivision. 
  6.13     Sec. 7.  [349A.21] [VIDEO LOTTERY NET TERMINAL INCOME.] 
  6.14     Subdivision 1.  [VIDEO LOTTERY LICENSEE.] The video lottery 
  6.15  licensee shall retain 28.4 percent of net terminal income to be 
  6.16  distributed as follows: 
  6.17     (1) 8.4 percent of net terminal income to be set aside and 
  6.18  used for purses for live races conducted by the video lottery 
  6.19  licensee at its facility; and 
  6.20     (2) 20 percent to the video lottery licensee.  
  6.21     Subd. 2.  [LOTTERY OPERATIONS.] The director may not credit 
  6.22  in any fiscal year more than ten percent of net terminal income 
  6.23  to the lottery operations account established under section 
  6.24  349A.10, subdivision 3, for the operation of the video lottery 
  6.25  terminal system.  
  6.26     Subd. 3.  [OPTIONAL ARRANGEMENT.] The amount set aside for 
  6.27  purses and the amount retained by the licensee may be adjusted 
  6.28  by written agreement between the licensee and the horseperson's 
  6.29  organization representing the majority of horsepersons who have 
  6.30  raced at the facility during the 24 months immediately preceding 
  6.31  the agreement, but the total amount cannot exceed 28.4 percent 
  6.32  of the net terminal income. 
  6.33     Subd. 4.  [DEPOSIT OF RECEIPTS.] The director may require 
  6.34  the video lottery licensee to deposit in a separate account to 
  6.35  the credit of the lottery, in banks designated by the director, 
  6.36  net terminal income, less money retained by the video lottery 
  7.1   licensee as set forth in subdivision 1, and allow money 
  7.2   deposited to be transferred to the lottery through electronic 
  7.3   fund transfer. 
  7.4      Subd. 5.  [PENALTY; INTEREST.] The video lottery licensee 
  7.5   shall pay interest at the rate established for purposes of 
  7.6   section 349A.10, subdivision 4, paragraph (c), on any amount 
  7.7   owed to the director and not paid within the time prescribed by 
  7.8   the director. 
  7.9      Subd. 6.  [DEPOSIT OF NET PROCEEDS.] Notwithstanding 
  7.10  section 349A.10, subdivision 5, within 30 days after the end of 
  7.11  each month, the director shall deposit in the state treasury the 
  7.12  net terminal income, less amounts paid to the video lottery 
  7.13  licensee, amounts paid to the commissioner of administration 
  7.14  under subdivision 7, and amounts credited to the lottery 
  7.15  operations account.  These net proceeds, less 40 percent which 
  7.16  must be credited to the environment and natural resources trust 
  7.17  fund, shall be retained in the state treasury in a special fund, 
  7.18  to be known as the sports infrastructure fund.  
  7.19     Subd. 7.  [INDIAN BENEFIT GRANTS.] The commissioner of 
  7.20  administration shall receive two percent of net terminal income 
  7.21  to be administered in grants to nonreservation Indian projects.  
  7.22  The purpose of these projects is to encourage the economic and 
  7.23  social well-being of Indians residing in Minnesota who are not 
  7.24  living on reservations or receiving proceeds from tribal 
  7.25  gambling operations. 
  7.26     Sec. 8.  [349A.22] [CONFLICT OF INTEREST RELATING TO VIDEO 
  7.27  LOTTERY.] 
  7.28     The director or an employee of the lottery, or a member of 
  7.29  the immediate family of the director or employee residing in the 
  7.30  same household, may not play a game on a video lottery terminal 
  7.31  nor have any personal pecuniary interest in any vendor holding a 
  7.32  contract with the lottery for purchase of video lottery 
  7.33  terminals or in the video lottery licensee. 
  7.34     Sec. 9.  [349A.23] [PROHIBITIONS.] 
  7.35     Subdivision 1.  [PURCHASE BY MINORS.] A person under the 
  7.36  age of 18 years may not play a game on a video lottery terminal. 
  8.1      Subd. 2.  [SALE TO MINORS.] A video lottery licensee may 
  8.2   not allow a person under the age of 18 years to play a game on a 
  8.3   video lottery terminal. 
  8.4      Sec. 10.  [349A.24] [CRIMINAL HISTORY.] 
  8.5      The director has access to all criminal history data 
  8.6   compiled by the director of gambling enforcement on any person 
  8.7   under contract with the lottery to provide goods or services 
  8.8   relating to video lottery terminals. 
  8.9      Sec. 11.  [349A.25] [GAMBLING DEVICE; VIDEO LOTTERY 
  8.10  TERMINALS.] 
  8.11     Subdivision 1.  [VIDEO LOTTERY TERMINAL.] (a) 
  8.12  Notwithstanding sections 349A.13, clause (2); and 349A.16 to 
  8.13  349A.24, authorize the director to install or operate a video 
  8.14  lottery terminal operated by coin or currency, which when 
  8.15  operated determines the winner of a game. 
  8.16     (b) Sections 340A.410, 609.755, and 609.76 do not prohibit 
  8.17  the manufacture, sale, placement, operation, or possession of a 
  8.18  video lottery terminal under sections 349A.16 to 349A.24. 
  8.19     Subd. 2.  [GAMBLING DEVICE.] Notwithstanding section 
  8.20  609.75, subdivision 4, a gambling device does not include a 
  8.21  video lottery terminal operated by the lottery under sections 
  8.22  349A.16 to 349A.24. 
  8.23     Sec. 12.  [EFFECTIVE DATE.] 
  8.24     This act is effective July 1, 1997.