DEPARTMENT OF REVENUE [ 61 PA. CODE CH. 901 ] Local Option Small Games of Chance [41 Pa.B. 4638]
[Saturday, August 27, 2011]The Department of Revenue (Department), under authority in section 9 of the Local Option Small Games of Chance Act (10 P. S. § 319), proposes to amend Chapter 901 (relating to local option small games of chance) to read as set forth in Annex A.
Purpose of Proposed Rulemaking
This rulemaking is proposed to amend Chapter 901 to improve the clarity and effectiveness of the Department's regulations regarding games of chance. In addition, the Department is proposing to add sections regarding the assignment of a game of chance form number by registered manufacturers to identify a specific and distinct game of chance.
Explanation of Regulatory Requirements
Amendments to § 901.1 (relating to definitions) are proposed for clarity to the definitions of ''chance,'' ''pull-tab'' and ''punch.'' Two new definitions are added for ''form number'' to identify a specific and distinct game of chance and ''sale'' to explain that the term includes both sale and resale.
The proposed amendment to § 901.23(a)(2) (relating to restriction of sales) adds the following clarifying language: ''the Department has approved for use'' in this Commonwealth. In addition, amendments have been made to subsection (b) to clarify ''for sale or use'' in this Commonwealth.
Section 901.116 (relating to change in ownership or personnel) is proposed to be rescinded. This section is superseded by § 901.103a (relating to change of application information), which became effective on August 12, 2006.
Proposed amendments to § 901.117(a) (relating to denial, notice of violation and revocation) add new language to outline the actions for mandatory denial and revocation. Current subsection (a) is renumbered as subsection (b), renamed from ''manufacturer registration certificate'' to ''discretionary denial and revocation'' and enhanced with clarifying terms. Current subsection (b) is renumbered as subsection (c) and the name is shortened to ''game of chance.'' Current subsection (c) is renumbered as subsection (d) with clarifying language added to paragraph (1). Subsection (d) is renumbered as subsection (e).
Proposed § 901.117a(a) (relating to registration following denial or revocation) outlines reapplying after a denial. The current language in this section is renumbered as subsection (b), titled ''revocations.'' The period of time manufacturers are ineligible to apply for and receive another certificate following revocation is also proposed to be amended.
Section 901.143 (relating to restrictions on distributorship interest) is amended to expand subsection (b) on pecuniary interest.
Proposed amendments to § 901.151 (relating to denial, notice of violation and revocation of licenses) add clarifying language to new subsection (a), which outlines the actions for mandatory denial and revocation. The current language in subsection (a) is renumbered as subsection (b), renamed from ''distributor license'' to ''discretionary denial and revocation'' and language regarding a notice of violation is proposed to be deleted. The current subsection (b) is renumbered as subsection (c) and amended with clarifying terms. The current subsection (c) is renumbered as subsection (d).
Proposed amendments to § 901.151a(a) (relating to licensing following denial or revocation) add language to outline reapplying after a denial. The current language in this section is lettered as subsection (b), titled ''revocations'' and the period of time distributors are ineligible to apply for and receive another certificate following revocation is amended.
Section 901.425 (relating to records) is amended to clarify documentation on sales invoices. The second sentence in paragraph (1)(iv) is deleted and rewritten in more detail in paragraph (1)(v). Paragraphs (1)(v)—(viii) are renumbered as paragraph (1)(vii)—(ix).
Section 901.445 (relating to records) is amended to add language addressing invoice requirements for the selling of games of chance to another Pennsylvania licensed distributor or a Pennsylvania licensed eligible organization. Paragraph (1)(v) and (vi) is new. Current paragraph (1)(v)—(viii) is renumbered as paragraph (1)(vii)—(ix).
Section 901.601(c) (relating to uniform minimum quality standards) is amended by clarifying language regarding pull-tabs. In addition, subsection (c)(1) is renumbered as subsection (c). Current subsection (c)(2) is renumbered as subsection (d) and enhanced with more details regarding sub-deals. Subsections (e) and (f), regarding separate and distinct pull-tabs and contingent purchases, are proposed to be added.
Proposed § 901.610 (relating to pull-tab count) references § 901.731(g) (relating to punchboard and pull-tab operation).
Section 901.632 (relating to predetermination of rules, winning chances and prizes) has been amended to include two subsections. Proposed subsection (a) contains the current language and the insertion of ''for sale or use in this Commonwealth.'' Proposed language in subsection (b) is added to further explain predetermination at the manufacturer level.
Proposed § 901.634 (relating to game of chance form numbers) is added to explain the rules regarding the assignment of a form number for each game of chance by a registered manufacturer. An example has also been included.
Proposed language in § 901.709(a) (relating to one eligible organization and license per premises) clarifies that only one license may be issued for each licensed premise. Subsection (b) is created with the first sentence of the existing language under this section. Proposed subsection (c) contains the remaining sentences currently in this section and is enhanced with a sentence that explains that an eligible organization that permits the use of its premises shall comply with § 901.510 (relating to use of licensed premises by more than one organization).
Section 901.731(g) is proposed to be amended by editing language and inserting a reference to proposed § 901.610.
Affected Parties
Manufacturers and distributors of games of chance doing business in this Commonwealth, licensing authorities and eligible organizations may be affected by the proposed rulemaking.
Fiscal Impact
The Department has determined that the proposed rulemaking, which provides clarification of existing policy, will have minimal fiscal impact on the Commonwealth.
Paperwork
The proposed rulemaking will not generate additional paperwork for the public or the Commonwealth.
Effectiveness/Sunset Date
The proposed rulemaking will become effective upon final-form publication in the Pennsylvania Bulletin. The regulations are scheduled for review within 5 years of final publication. A sunset date has not been assigned.
Contact Person
Interested persons are invited to submit in writing comments, suggestions or objections regarding the proposed rulemaking to Mary R. Sprunk, Office of Chief Counsel, Department of Revenue, P. O. Box 281061, Harrisburg, PA 17128-1061 within 30 days after publication in the Pennsylvania Bulletin.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on August 12, 2011, the Department submitted a copy of this proposed rulemaking and a copy of a Regulatory Analysis Form to the Independent Regulatory Review Commission (IRRC) and to the Chairpersons of the House Committee on Finance and the Senate Committee on Finance. In addition to submitting the amendment, the Department has provided IRRC and the Committees with a copy of a detailed Regulatory Analysis Form prepared by the Department in compliance with Executive Order 1996-1, ''Regulatory Review and Promulgation.'' A copy of this material is available to the public upon request.
Under section 5(g) of the Regulatory Review Act, IRRC may convey any comments, recommendations or objections to the proposed rulemaking within 30 days of the close of the public comment period. The comments, recommendations or objections must specify the regulatory review criteria which have not been met. The Regulatory Review Act specifies detailed procedures for review, prior to final publication of the rulemaking, by the Department, the General Assembly and the Governor of comments, recommendations or objections raised.
DANIEL MEUSER,
SecretaryFiscal Note: 15-451. No fiscal impact; (8) recommends adoption.
Annex A TITLE 61. REVENUE PART VII. LOCAL OPTION SMALL GAMES
OF CHANCECHAPTER 901. LOCAL OPTION SMALL GAMES
OF CHANCESubchapter A. GENERAL PROVISIONS DEFINITIONS § 901.1. Definitions.
The following words and terms, when used in this part, have the following meanings, unless the context clearly indicates otherwise:
* * * * * Chance—A right purchased for consideration to participate in a game for a prize or prizes offered in the game, which right is represented by a tangible item such as a pull-tab, punch, ticket, document, paper or other similar item.
* * * * * Form number—A unique number or alphanumeric code assigned by the manufacturer to identify a specific and distinct game of chance.
* * * * * Pull-tab—A game piece representing a single chance in a pull-tab game made completely of paper or paper products with concealed numbers or symbols that must be exposed by the player to determine wins or losses.
* * * * * Punch—A crimped strip of paper or similar material that is enclosed in a punchboard receptacle [and] representing a single chance in a punchboard that contains either a winning or losing number or symbol printed on one side and a serial number printed on the other.
* * * * * Sale—The term includes both sale and resale.
* * * * * GENERAL APPLICABILITY § 901.23. Restriction of sales.
(a) Manufacturers.
* * * * * (2) Sales. A registered manufacturer may only sell, offer for sale or furnish games of chance that [have been approved by the Department for sale] the Department has approved for use in this Commonwealth. A registered manufacturer may only sell, offer for sale or furnish approved games of chance for sale or use in this Commonwealth to a licensed distributor. This paragraph does not apply to the sale of raffle, daily drawing or weekly drawing tickets.
(b) Distributors.
(1) Licensure. A distributor shall apply for and obtain from the Department a distributor license to sell, offer for sale or furnish games of chance for sale or use in this Commonwealth. This paragraph does not apply to distributors that only sell, offer for sale or furnish raffle, daily drawing or weekly drawing tickets.
(2) Sales. A licensed distributor may only sell, offer for sale or furnish approved games of chance [for use] within this Commonwealth to another licensed distributor or to a licensed eligible organization. This paragraph does not apply to the sale of raffle, daily drawing or weekly drawing tickets.
(3) Purchase. A licensed distributor may only purchase approved games of chance for [resale] sale in this Commonwealth from a registered manufacturer or licensed distributor. This paragraph does not apply to the purchase of raffle, daily drawing or weekly drawing tickets.
* * * * * Subchapter B. LICENSING AND REGISTRATION MANUFACTURER REGISTRATION § 901.116. [Change in ownership or personnel] (Reserved).
[The manufacturer shall make a written report to the Department of changes of responsible persons engaged in the business of the manufacturer. This report shall also include a change in the management, ownership, directorship or equity ownership of 10% or more, and a change in the manufacturer's representatives. The report shall be filed on September 15.]
§ 901.117. Denial, notice of violation and revocation.
(a) [Manufacturer registration certificate.] Mandatory denial and revocation. The Department will deny a manufacturer's application for registration and certificate and will revoke a registration and certificate if the applicant or registered manufacturer fails to do one or more of the following:
(1) File a complete application.
(2) File required State tax reports.
(3) Pay any State tax liability that is not subject to a timely administrative or judicial appeal or is not subject to and not in default of a duly authorized deferred payment plan.
(b) Discretionary denial and revocation. The Department may deny [an] a manufacturer's application for registration and a certificate[, issue a notice of violation] or revoke a registration and certificate if the manufacturer or a person required to be identified in the application form commits one or more of the following acts:
* * * * * [(b)] (c) Game of chance [approval]. The Department may deny an application for a game of chance approval. The Department may issue a notice of violation for or revoke an approved game of chance if the game of chance fails to meet the requirements of the act or this part. The Department may revoke its approval of a game if the Department determines that the approval was issued in error.
[(c)] (d) Notice of violation.
(1) [A] The Department may issue a notice of violation [is issued] to notify a registered manufacturer of a violation of the act or this part and to provide the manufacturer with an opportunity to remedy the violation. A manufacturer retains the privileges conferred on it by its certificate or game approval during the notice period and may continue to sell games of chance in this Commonwealth.
* * * * * [(d)] (e) Notice.
* * * * * § 901.117a. Registration following denial or revocation.
(a) Denial. Unless otherwise provided by the act or this part, a manufacturer whose application for a manufacturer's registration certificate is denied may reapply as follows:
(1) If the denial is the result of an incomplete application, the manufacturer may reapply at any time after the denial by filing a complete application.
(2) If the denial is a result of the manufacturer's violation of the act or this part, the provision in subsection (b) related to revocations applies.
(b) Revocations. Unless otherwise provided by the act or this part, a manufacturer whose registration and certificate are revoked is ineligible to reapply for registration and another certificate as follows:
(1) [A manufacturer whose certificate is revoked is ineligible to apply for and receive another certificate for the remaining registration term or] For the first revocation, 6 months[, whichever is longer].
(2) For a second revocation, [the manufacturer is ineligible to apply for and receive another certificate for the remaining registration term as well as the following registration term] 18 months.
(3) For a third and subsequent revocation, [the manufacturer is ineligible to apply for and receive another certificate for] 30 months.
DISTRIBUTOR LICENSING § 901.143. Restrictions on distributorship interest.
* * * * * (b) A person who is an officer, director, proprietor, consultant, employee or owner of a distributorship may not have a pecuniary interest in the operation of games of chance. For purposes of this section, a pecuniary interest is the actual or potential for an accession to wealth, whether cash or property, resulting from the play and operation of a game of chance. It includes an interest resulting from one of the following acts:
(1) The sale of a game of chance in exchange for a contingent fee based upon a percentage of the proceeds from chances sold in or prizes awarded in the game.
(2) A lease of a dispensing machine in which the rental is based upon the number of games purchased by the eligible organization, the percentage of proceeds from chances sold or prizes awarded in games of chance.
* * * * * § 901.151. Denial, notice of violation and revocation of licenses.
(a) [Distributor license.] Mandatory denial and revocation. The Department will not approve an application for a distributor license and will revoke a license if the applicant or licensed distributor fails to do one of the following:
(1) File a complete application.
(2) File required State tax reports.
(3) Pay any State tax liability that is not subject to a timely administrative or judicial appeal or is not subject to and not in default of a duly authorized deferred payment plan.
(b) Discretionary denial and revocation. The Department may deny a license application[, issue a notice of violation] or revoke a license if the distributor or a person required to be identified in the application form commits one of the following acts:
* * * * * [(b)] (c) Notice of violation.
(1) [A] The Department may issue a notice of violation [is issued] to notify a licensed distributor of a violation of the act or this part and to provide the distributor with an opportunity to remedy the violation. A distributor retains the privileges conferred on it by its license during the notice period and may continue to sell games of chance in this Commonwealth.
* * * * * [(c)] (d) Notice.
* * * * * § 901.151a. Licensing following denial or revocation.
(a) Denial. Unless otherwise provided by the act or this part, a distributor whose application for a distributor's license is denied may reapply as follows:
(1) If the denial is the result of an incomplete application, the manufacturer may reapply at any time after the denial by filing a complete application.
(2) If the denial is a result of the manufacturer's violation of the act or this part, the provision in subsection (b) related to revocations applies.
(b) Revocations. Unless otherwise provided by the act or this part, a distributor whose license is revoked is ineligible to apply for and receive another license as follows:
(1) [A distributor whose license is revoked is ineligible to apply for and receive another license for the remaining license term or] For the first revocation, 6 months[, whichever is longer].
(2) For a second revocation, [the distributor is ineligible to apply for and receive another license for the remaining license term as well as the following license term] 18 months.
(3) For a third and subsequent revocation, [the distributor is ineligible to apply for and receive another license for] 30 months.
Subchapter D. RECORDKEEPING MANUFACTURING RECORDS AND REPORTS § 901.425. Records.
A record must include the following:
(1) Sales invoices. A manufacturer shall record every sale, return or other type of transfer of games of chance to a Pennsylvania registered manufacturer or Pennsylvania licensed distributor by completing a sales invoice or credit memo. An invoice must be prenumbered at the time of purchase. The numbering must be consecutive, using at least four digits. Manufacturers may use a computer generated numbering system if the same system is used for all sales and specific numbers cannot be input by use of a manual terminal or other device. The invoice must contain the following information:
* * * * * (iv) The description of each item sold, including serial numbers for pull-tabs and form number. [Each game listed on the invoice that the Department has approved for sale in this Commonwealth must be clearly noted.] The games may be listed in separate attachment identifying the form numbers and serial numbers.
(v) For sales to a Pennsylvania registered manufacturer or Pennsylvania licensed distributor, the manufacturer shall indicate on the invoice each game that the Department has approved and not approved for sale in this Commonwealth.
(vi) The quantity and sale price of each individual item, including individual items of merchandise to be used as prizes on punchboards and pull-tabs.
[(vi)] (vii) The gross amount of each sale to each customer, including discount terms and the total dollar amount of a discount.
[(vii)] (viii) The total amount of the invoice.
[(viii)] (ix) The distributor license number.
* * * * * DISTRIBUTOR RECORDS AND REPORTS § 901.445. Records.
A record must include the following:
(1) Sales invoices. A distributor shall record every sale, return or other type of transfer of games of chance to a Pennsylvania licensed distributor or a Pennsylvania licensed eligible organization by completing a standard sales invoice or credit memo. An invoice must be prenumbered at the time of purchase. The numbering must be consecutive using at least four digits. The invoice must contain the following information:
* * * * * (v) For sales to a Pennsylvania licensed distributor, the distributor shall indicate on the invoice each game that the Department has approved and not approved for sale in this Commonwealth.
(vi) For sales to a Pennsylvania licensed eligible organization, the distributor shall confirm that the Department has approved for sale in this Commonwealth each game listed on the invoice and provide a written statement on the invoice affirming that each game listed on the invoice has been approved for sale in this Commonwealth. A Pennsylvania licensed distributor may not sell (and therefore invoice) a game that the Department has not approved for sale in this Commonwealth to a licensed eligible organization. See § 901.23(b)(2) (relating to restriction of sales).
(vii) The quantity and sales price of each individual item, including individual items of merchandise to be used as prizes on punchboards and pull-tabs.
[(vi)] (viii) The gross amount of each sale to each licensed eligible organization, including all discount terms and the total dollar amount of any discount.
[(vii)] (ix) The total amount of the invoice.
[(viii)] (x) The ideal prizes per game.
* * * * * Subchapter F. MANUFACTURING STANDARDS PULL-TAB MANUFACTURING STANDARDS § 901.601. Uniform minimum quality standards.
* * * * * (c) Randomization.
[(1)] Pull-tabs in a deal must be distributed and mixed among all other pull-tabs in a deal so as to eliminate any pattern in the location of a particular pull-tab, including winning and losing pull-tabs, in a deal or between deals.
[(2)] (d) Sub-deals. A deal in a pull-tab game may not be segregated into sub-deals or portions [so that a]. A pull-tab game may not be manufactured so that a part of a deal may be distinguished or played separately from the rest of the deal in the pull-tab game.
(e) Separate and distinct pull-tabs. Each pull-tab in a deal of a pull-tab game must be produced as a separate and distinct chance that can be purchased separately from all other pull-tabs in the deal. A pull-tab may not be attached or connected to another pull-tab in a deal if the pull-tabs attached or connected can be sold separately. Nothing in this subsection shall be construed to prohibit a pull-tab from containing winning and losing numbers or symbols that are concealed by multiple break-open windows, banded tickets or stapled tickets or other similar concealment methods.
(f) Contingent purchases. A pull-tab game may not be manufactured that makes the purchase of one pull-tab contingent upon the purchase of another pull-tab, chance or item.
§ 901.610. Pull-tab count.
(a) A pull-tab deal in a pull-tab game may not contain more than 4,000 individual pull-tabs. See also § 901.731(g) (relating to punchboard and pull-tab operation).
(b) A pull-tab will be counted towards the number of individual pull-tabs in a deal if the pull-tab represents a separate and distinct chance in the pull-tab game that can be purchased separately from other chances in the pull-tab game.
GENERAL MANUFACTURING STANDARDS § 901.632. Predetermination of rules, winning chances and prizes.
(a) Except as provided in § 901.731(b)(2) (relating to punchboard and pull-tab operation), a registered manufacturer of a pull-tab game or punchboard for sale or use in this Commonwealth shall predetermine the rules, prize structure, prizes, prize values, winning pull-tabs or punches and the corresponding prize for each pull-tab or punch during the manufacturing of the pull-tab game or punchboard. A person may not alter a pull-tab game or punchboard manufactured by a registered manufacturer and offered for sale and use within this Commonwealth.
(b) A registered manufacturer may not produce a pull-tab game or punchboard for sale or use in this Commonwealth that permits the operator of or a participant in the game to choose between optional game rules, payout structures or methods of operating the game.
§ 901.634. Game of chance form numbers.
(a) A registered manufacturer shall assign a separate and distinct form number for each game of chance produced for sale or use in this Commonwealth. A variation in the form number indicates a separate and distinct game.
(b) All aspects of a game to which a form number has been assigned must be identical. This includes the following:
(1) The name of the game and its exact spelling, graphics, winning and losing numbers and symbols.
(2) The number of chances.
(3) The sale price for each chance.
(4) The rules of play.
(5) The total prize payout structure.
(6) The exact prize payout for each winning chance.
Example. A registered manufacturer produces a game with the name ''Lucky Sevens'' and Form #LS-1500. The deal for the game consists of 1,500 pull-tab tickets (and therefore chances) each sold at $1. The game has an ideal prize payout of 81.333% if all the tickets are sold and all prizes are claimed (that is, the game pays out $1,220 of the $1,500 proceeds from the sale of all tickets). The game has 50 instant winners that pay out a total of $720 (3 at $100, 3 at $50, 4 at $25 and 10 at $10, 10 at $5 and 20 at $1). The game also has ten hold tickets with a chance at a seal prize of $500. Every game produced with the Form #LS-1500 must be designated with the name ''Lucky Sevens'' and must be identical including the prize payout percentage, total payout and prize structure in this example. There may not be any variation. For example, the manufacturer could not replace the four $25 instant winner tickets with ten more instant winners at $10 each. The manufacturer could produce this game but it would require a separate and distinct form number.
Subchapter G. OPERATION OF GAMES ELIGIBLE ORGANIZATION OPERATION OF GAMES § 901.709. One eligible organization and license per premises.
(a) Only one license may be issued for each licensed premises.
(b) Only one licensed eligible organization may use a licensed premise to conduct games of chance.
(c) A licensed eligible organization may allow another licensed eligible organization that does not own or lease a normal business premises to conduct games of chance on its premises. When an eligible organization uses the premises of another eligible organization, each eligible organization shall notify its respective licensing authority and district attorney in writing at least 10 days prior to using the premises. An eligible organization that permits the use of its premises shall comply with § 901.510 (relating to use of licensed premises by more than one organization).
PUNCHBOARD AND PULL-TAB OPERATION PROCEDURES § 901.731. Punchboard and pull-tab operation.
* * * * * (g) A person may not [sell or transfer to another person in this Commonwealth, for use within this Commonwealth, or] put out for public play[,] a pull-tab deal [which] that contains more than 4,000 individual pull-tabs [or 4,000 stapled packets of jar tickets]. See also § 901.610 (relating to pull-tab count).
[Pa.B. Doc. No. 11-1461. Filed for public inspection August 26, 2011, 9:00 a.m.]
