Senate Bill No. 189
(By Senators Fanning, Kessler, Ross, Edgell,
Bowman, Helmick, Rowe, Hunter and Minear)
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[Introduced January 14, 2002; referred to the Committee
on the Judiciary; and then to the Committee on Finance.]
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A BILL to repeal section fifteen, article twenty, chapter forty-seven of the code of West Virginia, one thousand nine hundred thirty-one, as amended; to repeal section fifteen, article twenty-one of said chapter; to amend article twenty of said chapter by adding thereto two new sections, designated sections fifteen-a and thirty-two; to amend and reenact sections sixteen and twenty-nine of said article; to amend article twenty-one of said chapter by adding thereto three new sections, designated sections fifteen-a, thirty-one and thirty-two ; and to amend and reenact section sixteen of said article, all relating to charitable bingo and charitable raffles; setting forth required and permitted uses of proceeds from charitable bingo and charitable raffles; allowing licensees to offset losses from one with gains from the other; providing an alternative penalty for eligible applicants; and establishing effective dates.

Be it enacted by the Legislature of West Virginia:
That section fifteen, article twenty, chapter forty-seven of the code of West Virginia, one thousand nine hundred thirty- one, as amended, be repealed; that section fifteen, article twenty-one of said chapter be repealed; that article twenty of said chapter be amended by adding thereto two new sections, designated sections fifteen-a and thirty-two;

that section sixteen of said article be amended and reenacted, all to read as follows:
ARTICLE 20. CHARITABLE BINGO.

§47-20-15a. Permitted use of proceeds; disapproval of certain contracts or leases.

(a) During the period of a charitable bingo license, the gross proceeds from charitable bingo may only be used by a licensee for: (i) Payment of prizes awarded to winners of charitable bingo games; (ii) payment of reasonable, necessary and actual expenses incurred in connection with the conduct of charitable bingo, including, but not limited to, those for custodial services, rent, advertising, equipment and supplies to conduct charitable bingo, security personnel, promotional supplies, workers or operators required to conduct charitable bingo, and child care services for the children of patrons; and expenses directly related to the existence and operation of the licensee charitable or public service organization where the expenses are directly related to the charitable or public service purpose underlying the tax exempt status of the licensee organization, including, but not limited to, rent, mortgage payments, compensation to employees, payment of maintenance and repairs, premiums for property, casualty or liability insurance for the licensee organization; on-going utility expenses; printing, postage and mail expenses; and any other expense incurred by the licensee organization directly in furtherance of its charitable or public service purpose; and (iii) donations for the purposes, and to the entities, organizations or associations, described under subsection 170(c)(1), subsection 170(c)(2) or subsection 170(c)(3) of the Internal Revenue Code: Provided, That no more than an amount equal to twenty percent of the gross proceeds from charitable bingo received by a licensee in a license period, regardless of the amount of expenses it actually incurs, as described in subdivision (i) and (ii) of this subsection, may be used for the expenses described in subdivision (ii) of this subsection: Provided, however, That notwithstanding any other provision of this article, each licensee, which is not an entity, organization, or association described in subsection 170(c)(1), 170(c)(2), or 170(c)(3) of the Internal Revenue Code, regardless of the amount of expenses it incurs as described in subdivisions (i) and (ii) of this subsection, shall, within one year next following such license period, make the donations set forth in subdivision (iii) in an amount equal to not less than four percent of its gross proceeds received from the conduct of charitable bingo: Provided further, That, with respect to a license period, at least one half of the amount of such donations shall be made by the remittance of money: And provided further, That, with respect to a license period, not less than twenty-five percent of the amount of such donations shall be made to entities described in subsection 170(c)(1) of the Internal Revenue Code which have their principal office in the county in which the licensee conducts charitable bingo.
(b) The commissioner may disapprove any contract for sale of goods or services to any charitable bingo licensee for use in or with relation to any charitable bingo operation or occasion, or any lease of real or tangible personal property to any charitable bingo licensee for use in or with relation to any charitable bingo operation or occasion, if the contract or lease is unreasonable or not representative of fair market value. Contracts or leases which are disapproved are in contravention of this article, and are void. Any attempt by any charitable bingo licensee to engage in transactions under the terms of any lease or contract that has been disapproved is grounds for revocation or suspension of the charitable bingo license and for refusal by the commissioner to renew the charitable bingo license.
(c) If a property owner or lessee, including his or her agent, has entered into a rental contract to hold super bingo occasions on his or her premises, the premises shall be rented, for super bingo occasions, to not more than four super bingo licensees during any period of four consecutive calendar weeks: Provided, That each of the charitable or public service organizations desiring to hold a super bingo occasion must possess its own super bingo license. Subject to this limitation, the premises may be used for super bingo occasions during two consecutive days during a conventional weekend. For purposes of this subsection, the term "conventional weekend" means Saturday and Sunday. When used two consecutive days during a conventional weekend the super bingo occasions may occur at the same facility no more often than on alternating weekends during a calendar month.
(d) Any licensee which, in good faith, finds itself unable to comply with the requirements of this provision shall apply to the commissioner for permission to expend its proceeds from charitable bingo for one or more charitable or public service purposes other than that stated in its license application or for permission to expend the proceeds later than the one-year time period specified in this section. The application shall be on a form furnished by the commissioner and shall include the particulars of the requested changes and the reasons for the changes. The application shall be filed no later than sixty days before the end of the one-year period specified in this section. In the case of an application to extend the time in which the proceeds are to be expended for a charitable or public service purpose, the licensee shall file the periodic reports with the commissioner as the commissioner directs until the proceeds are expended.
(e) For purposes of this article, the term "donations" means the acts of gratuitously remitting money, transferring other property or providing the use of property or services to another, the amount or amounts of which shall be based on the fair market value thereof determined pursuant to a legislative rule proposed by the commissioner in accordance with the provisions of chapter twenty-nine of this code.
§47-20-16. Records, commissioner audit.
Any licensee which holds a bingo occasion as provided by this article shall maintain a separate checking account and a separate bookkeeping procedure for its bingo operations. A licensee may not commingle moneys from its charitable bingo operations with moneys from its charitable raffles operations for which it may also be licensed, but it may, by check, transfer funds between the separate checking accounts to offset any losses from its conduct of one with gains from its conduct of the other. Money for expenses may be withdrawn only by checks having preprinted consecutive numbers and made payable to a specific person, firm or corporation and at no time shall a check be made payable to cash. A licensee shall maintain all records required by this article for a least three years and the records shall be open to the commissioner for reasonable inspection. Whenever the tax commissioner has reasonable cause to believe a licensee has violated any of the provisions of this article, he or she may perform or cause to be performed an audit of the licensee's books and records: Provided, That the tax commissioner shall perform or cause to be performed an audit of the books and records of any licensee that has awarded total prizes in excess of one hundred seventy-five thousand dollars. The tax commissioner shall file a copy of the completed audit with the county commission of the county wherein the licensee holds bingo occasions.
§47-20-29. Effective date.
The effective date of this article is the fifteenth day of August, one thousand nine hundred eighty-one. The effective date of the amendments made to this article by this legislation is the first day of July, two thousand two.
§47-20-32. Alternative penalty.
(a) Notwithstanding anything in this code to the contrary, a licensee may elect to comply with the provisions of this section in lieu of other enforcement action to which it may otherwise be subject under this article. For purposes of this section, the term "other enforcement action" means an action that, on or after the effective date of this section, is being taken, or may be taken, pursuant to an administrative decision or order or by agreement, including, but not limited to, any suspension, probation, criminal or civil penalty, fine or other punitive action, or alternative disposition, and that is based on one or more violations of this article, which occurred before the enactment of this section, and which are alleged or admitted to having been committed by a person to whom a license was issued pursuant to the authority of either article.
(b) A licensee that elects the alternative penalty provided in this section shall retroactively satisfy, for the license periods with respect to which the other enforcement action against it relates, the provision of section fifteen-a of this article mandating that no less than an amount equal to four percent of the entire gross proceeds the licensee received from its conduct of charitable bingo during such license periods shall be donated by the licensee for the purposes, and to those entities, organizations or associations, described in subsection 170(c)(1), 170(c)(2) or 170(c)(3) of the Internal Revenue Code: Provided, That the amount of any past donations which an electing licensee shall have made to entities, organizations or associations, with respect to the license periods to which the other enforcement action relates, shall be counted toward satisfaction by such electing licensee of section fifteen-a of this article for the purpose of the alternative penalty provided in this section: Provided, however, That donations made by a licensee pursuant to this section shall only be made by the remittance of money and may not count toward satisfaction of the licensee's obligations under section fifteen-a of this article for license periods commencing on or after the effective date of this section, if any.
(c) Any licensee that may be subject to other enforcement action and desiring to make the election permitted in this section, shall give written notice to the commissioner of its election of the alternative penalty provided in this section no more than ninety days after the effective date of this section, or ninety days after the first notice it has of the initiation of the other enforcement action against it, whichever is later: Provided, That, upon receipt of the notice, the commissioner shall suspend and hold in abeyance, as to the licensee, the other enforcement action against it during the period described in the following sentence. A licensee which has given timely notice of its election, as provided in the preceding sentence, shall complete making the donations necessary to satisfy the requirements of the alternative penalty not later than the third anniversary of the date the notice was received by the commissioner.
(d) Upon its full satisfaction of the requirements of this section, a licensee shall have the other enforcement action against it vacated and withdrawn: Provided, That a licensee which fails to timely elect and satisfy the requirements of this section shall thereafter and immediately be subjected to other enforcement action according to the original terms.
ARTICLE 21. CHARITABLE RAFFLES.

§47-21-15a. Permitted uses of proceeds; disapproval of certain contracts or leases.

(a) During the period of a charitable raffles license, the gross proceeds from charitable raffles awarded to winners of charitable raffles games may only be used by a licensee for: (i) Payment of prizes; (ii) payment of reasonable, necessary and actual expenses incurred in connection with the conduct of charitable raffles, including, but not limited to, those for custodial services, rent, advertising, equipment and supplies to conduct charitable raffles, security personnel, promotional supplies, workers or operators required to conduct charitable raffles, and child care services for the children of patrons; and expenses directly related to the existence and operation of the licensee charitable or public service organization where such expenses are directly related to the charitable or public service purpose underlying the tax exempt status of the licensee organization, including, but not limited to, rent, mortgage payments, compensation to employees, payment of maintenance and repairs, premiums for property, casualty or liability insurance for the licensee organization; on-going utility expenses; printing, postage and mail expenses; and any other expense incurred by the licensee organization directly in furtherance of its charitable or public service purpose; and (iii) donations for the purposes, and to the entities, organizations or associations, described under subsection 170(c)(1), subsection 170(c)(2) or subsection 170(c)(3) of the Internal Revenue Code: Provided, That no more than an amount equal to twenty percent of the gross proceeds from charitable raffles received by a licensee in a license period, regardless of the amount of expenses it actually incurs, as described in subdivisions (i) and (ii) of this subsection, may be used for the expenses described in subdivision (ii) of this subsection: Provided, however, That notwithstanding any other provision of this article, each licensee, which is not an entity, organization, or association described in subsection 170(c)(1), 170(c)(2), or 170(c)(3) of the Internal Revenue Code, regardless of the amount of expenses it incurs as described in subdivisions (i) and (ii) of this subsection, shall, within one year next following such license period, make the donations set forth in subdivision (iii) in an amount equal to not less than four percent of its gross proceeds received from the conduct of charitable raffles: Provided further, That, with respect to a license period, at least one half of the amount of the donations shall be made by the remittance of money: And provided further, That, with respect to a license period, not less than twenty-five percent of the amount of such donations shall be made to entities described in subsection 170(c)(1) of the Internal Revenue Code which have their principal office in the county in which the licensee conducts charitable raffles.
(b) The commissioner may disapprove any contract for sale of goods or services to any charitable raffles licensee for use in or with relation to any charitable raffles operation, or any lease of real or tangible personal property to any charitable raffles licensee for use in or with relation to any charitable raffles operation, if the contract or lease is unreasonable or not representative of fair market value. Contracts or leases which are disapproved are in contravention of this article, and are void. Any attempt by any charitable raffles licensee to engage in transactions under the terms of any lease or contract that has been disapproved is grounds for revocation or suspension of the charitable raffles license and for refusal by the commissioner to renew the charitable raffles license.
(c) Any licensee which, in good faith, finds itself unable to comply with the requirements of subsection (a) of this section shall apply to the commissioner for permission to expend its proceeds from charitable raffles for one or more charitable or public service purposes other than that stated in its license application or for permission to expend such proceeds later than the one-year time period specified in this section. The application shall be on a form furnished by the commissioner and shall include the particulars of the requested changes and the reasons for the changes. The application shall be filed no later than sixty days before the end of the one-year period specified in this section. In the case of an application to extend the time in which said proceeds are to be expended for a charitable or public service purpose, the licensee shall file such periodic reports with the commissioner as the commissioner directs until the proceeds are expended.
(d) For purposes of this article, the term "donations" means the acts of gratuitously remitting money, transferring other property or providing the use of property or services to another, the amount or amounts of which shall be based on the fair market value thereof determined pursuant to a legislative rule proposed by the commissioner in accordance with the provisions of chapter twenty-nine of this code.
§47-21-16. Records, commissioner audit.
Any licensee which holds a raffle occasion as provided by this article shall maintain a separate checking account and separate bookkeeping procedure for its raffle operations. A licensee may not commingle moneys from its charitable raffle operations with moneys from its charitable bingo operations for which it may also be licensed, but it may, by check, transfer funds between the separate checking accounts to offset any losses from its conduct of one with gains from its conduct of the other. All records required by this article shall be maintained for at least three years and shall be open to the commissioner for reasonable inspection. Whenever the commissioner has reasonable cause to believe a licensee has violated any of the provisions of this article, he may perform or cause to be performed an audit of the licensee's books and records.
§47-21-31. Alternative penalty.
(a) Notwithstanding anything in this code to the contrary, a licensee may elect to comply with the provisions of this section in lieu of other enforcement action to which it may otherwise be subject under this article. For purposes of this section, the term "other enforcement action" means an action that, on or after the effective date of this section, is being taken, or may be taken, pursuant to an administrative decision or order or by agreement, including, but not limited to, any suspension, probation, criminal or civil penalty, fine or other punitive action, or alternative disposition, and that is based on one or more violations of this article, which occurred before the enactment of this section, and which are alleged or admitted to having been committed by a person to whom a license was issued pursuant to the authority of either such article.
(b) A licensee that elects the alternative penalty provided in this section shall retroactively satisfy, for the license periods with respect to which the other enforcement action against it relates, the provision of section fifteen-a of this article mandating that no less than an amount equal to four percent of the entire gross proceeds the licensee received from its conduct of charitable raffles during the license periods shall be donated by the licensee for the purposes, and to those entities, organizations or associations, described in subsection 170(c)(1), 170(c)(2) or 170(c)(3) of the Internal Revenue Code: Provided, That the amount of any past donations which an electing licensee has made to any entities, organizations or associations with respect to the license periods to which the other enforcement action relates shall be counted toward satisfaction by such electing licensee of section fifteen-a of this article for the purpose of the alternative penalty provided in this section: Provided, however, That any donations made by a licensee pursuant to this section shall only be made by the remittance of money and may not count toward satisfaction of the licensee's obligations under section fifteen-a of this article for license periods commencing on or after the effective date of this section, if any.
(c) Any licensee that may be subject to other enforcement action and desiring to make the election permitted in this section, shall give written notice to the commissioner of its election of the alternative penalty provided in this section no more than ninety days after the effective date of this section, or ninety days after the first notice it has of the initiation of other enforcement action against it, whichever is later: Provided, That, upon receipt of the notice, the commissioner shall suspend and hold in abeyance, as to the licensee, the other enforcement action against it during the period described in the following sentence. A licensee which has given timely notice of its election, as provided in the preceding sentence, shall complete making the donations necessary to satisfy the requirements of the alternative penalty not later than the third anniversary of the date the notice was received by the commissioner.
(d) Upon its full satisfaction of the requirements of this section, a licensee shall have the other enforcement action against it vacated and withdrawn: Provided, That a licensee which fails to timely elect and satisfy the requirements of this section shall thereafter and immediately be subjected to other enforcement action according to the original terms.
§47-21-32. Effective date.
The effective date of the amendments made to this article by this legislation is the first day of July, two thousand two.

NOTE: The purpose of this bill is to reestablish the required and permitted uses of the proceeds from the conduct of charitable bingo and raffles.

The bill mandates that a portion of gross proceeds from charitable bingo and raffles be received by local government entities, charitable and veteran organizations and used for charitable, educational and public service purposes. In addition, it provides for eligible applicants to elect an alternative penalty for violation of the former law governing use of such proceeds.

§§47-20-15a and 32; and §§47-21-15a, 31 and 32 are new; therefore, strike-throughs and underscoring have been omitted.

§§47-20-16 and 29; and §47-21-16 contain new language; therefore, underscoring indicates new language that would be added.