11VAC15-22 Charitable Gaming Rules and Regulations

REGULATIONS

Vol. 25 Iss. 23 - July 20, 2009

TITLE 11. GAMING

CHARITABLE GAMING BOARD

Chapter 22

Final Regulation

Title of Regulation: 11VAC15-22. Charitable Gaming Rules and Regulations (amending 11VAC15-22-10, 11VAC15-22-20, 11VAC15-22-30, 11VAC15-22-110).

Statutory Authority: §§ 2.2-2456, 18.2-340.15, and 18.2-340.19 of the Code of Virginia.

Effective Date: August 19, 2009.

Agency Contact: Betty Bowman, Division Director, Department of Agriculture and Consumer Services, Division of Charitable Gaming, 101 N. 14th St., 17th Floor, James Monroe Building, Richmond, VA 23219, telephone [phone], FAX [phone], or email [e-mail].

Summary:

This action implements the provisions of (i) Chapters 387 and 689 of the 2008 Acts of Assembly that abolished the Department of Charitable Gaming and placed regulation of charitable gaming under the Department of Agriculture and Consumer Services, and (ii) Chapter 121 of the 2009 Acts of Assembly by raising the permit exemption threshold from $25,000 to $40,000 for all organizations authorized to conduct charitable gaming.

Part I
Definitions

11VAC15-22-10. Definitions.

In addition to the definitions contained in § 18.2-340.16 of the Code of Virginia, the words and terms below, when used in this chapter, shall have the following meanings unless the context clearly indicates otherwise:

"Board" means the Virginia Charitable Gaming Board.

"Board of directors" means the board of directors, managing committee or other supervisory body of a qualified organization.

"Calendar day" means the period of 24 consecutive hours commencing at 12:01 a.m. and concluding at midnight.

"Calendar week" means the period of seven consecutive calendar days commencing at 12:01 a.m. on Sunday and ending at midnight the following Saturday.

"Cash" means United States currency or coinage.

"Commissioner" means the Commissioner of the Virginia Department of Agriculture and Consumer Services.

"Concealed face bingo card" means a nonreusable bingo card constructed to conceal the card face. This type of card is commonly referred to under trade names such as "Tear-open" or "Bonanza Bingo."

"Conduct" means the actions associated with the provision of a gaming operation during and immediately before or after the permitted activity, which may include, but not be limited to (i) selling bingo cards or packs, electronic devices, instant bingo or pull-tab cards, or raffle tickets; (ii) calling bingo games; (iii) distributing prizes; and (iv) any other services provided by volunteer workers.

"DCG number" means a unique identification number issued by the department.

"Daubing" means covering a square containing a number called with indelible ink or otherwise concealing the number on a card or an electronic facsimile of a card.

"Deal" means each separate package or series of packages consisting of one game of instant bingo, pull-tabs or seal cards with the same serial number.

"Decision bingo" means a bingo game where the cost to a player to play is dependent on the number of balls called and the prize payout is in direct relationship to the number of participants and the number of balls called, but shall not exceed statutory prize limits for a regular bingo game.

"Department" means the Virginia Department of Charitable Gaming Agriculture and Consumer Services, Division of Charitable Gaming.

"Director" means the Director of the Virginia Department of Charitable Gaming.

"Discount" means any reduction in cost of admission or game packs or any other purchases through use of coupons, free packs or other similar methods.

"Disinterested player" means a player who is unbiased.

"Disposable paper card" means a nonreusable, paper bingo card manufactured with preprinted numbers.

"Door prize" means any prize awarded by the random drawing or random selection of a name or number based solely on attendance at a gaming session.

"Electronic bingo device" means an electronic device that uses proprietary software or hardware, or in conjunction with commonly available software and computers, displays facsimiles of bingo cards and allows a player to daub such cards.

"Fiscal year" or "annual reporting period" means the 12-month period beginning January 1 and ending December 31 of any given year.

"Flare" means a piece of paper, cardboard or similar material that bears printed information relating to the name of the manufacturer or logo, name of the game, card count, cost per play, serial number, the number of prizes to be awarded and the specific prize amounts in a deal of instant bingo, pull-tab or seal cards.

"Free space number," "perm number," "center number," "card number" or "face number" means the number generally printed in the center space of a bingo card that identifies the unique pattern of numbers printed on that card.

"Game program" means a written list of all games to be played including, but not limited to, the sales price of all bingo paper and electronic bingo devices, pack configuration, prize amounts to be paid during a session for each game, and an indication whether prize amounts are fixed or are based on attendance.

"Immediate family" means one's spouse, parent, child, sibling, grandchild, grandparent, mother or father-in-law or stepchild.

"Interested persons" means the president, an officer or bingo manager of any qualified organization which is exempt or is a permit applicant or holds a permit to conduct charitable gaming or the owner, director, officer or partner of an entity engaged in supplying charitable gaming supplies to organizations.

"IRS" means the United States Internal Revenue Service.

"Lucky Seven" means a bingo game as authorized in § 18.2-340.33 (9a) (b) of the Code of Virginia.

"Management" means the provision of oversight of a gaming operation, which may include, but is not limited to, the responsibilities of applying for and maintaining a permit or authorization, compiling, submitting and maintaining required records and financial reports, and ensuring that all aspects of the operation are in compliance with all applicable statutes and regulations.

"Manufacturer" means a person who assembles from raw materials or subparts a completed piece of bingo or other charitable gaming equipment or supplies. "Manufacturer" also means a person who modifies, converts, adds or removes parts to or from bingo or other charitable gaming equipment or supplies to further their promotion or sale for the conduct of charitable gaming.

"Operation" means the activities associated with production of a charitable gaming activity, which may include, but not be limited to (i) the direct on-site supervision of the conduct of charitable gaming; (ii) coordination of volunteers; and (iii) all responsibilities of charitable gaming designated by the organization's management.

"Owner" means any individual with financial interest of 10% or more in a supplier.

"Pack" means sheets of bingo paper or electronic facsimiles assembled in the order of games to be played. This may include specials and jackpots, but shall not include any winner-take-all, Lucky Seven or raffle.

"Prize" means cash, merchandise, certificate or other item of value awarded to a winning player.

"Progressive seal card" means a seal card game in which a prize is carried forward to the next deal if not won when a deal is completed.

"Remuneration" means payment in cash or the provision of anything of value for goods provided or services rendered.

"Seal card" means a board or placard used in conjunction with a deal of the same serial number which contains one or more concealed areas that, when removed or opened, reveal a predesignated winning number, letter or symbol located on that board or placard.

"Serial number" means a unique number printed by the manufacturer on each bingo card in a set, each instant bingo, pull-tab, or seal card in a deal, each electronic bingo device, or each door prize ticket.

"Series number" means the number of unique card faces contained in a set of disposable bingo paper cards or bingo hard cards. A 9000 series, for example, has 9000 unique faces.

"Session" means a period of time during which one or more bingo games are conducted that begins with the selection of the first ball for the first game and ends with the selection of the last ball for the last game.

"Treasure chest" means a raffle including a locked treasure chest containing a prize that a participant, selected through some other authorized charitable game, is afforded the chance to select from a series of keys a predetermined key that will open the locked treasure chest to win a prize.

"Use of proceeds" means the use of funds derived by an organization from its charitable gaming activities which are disbursed for those lawful religious, charitable, community or educational purposes. This includes expenses relating to the acquisition, construction, maintenance or repair of any interest in the real property involved in the operation of the organization and used for lawful religious, charitable, community or educational purposes.

"WINGO" is a variation of a traditional bingo game that uses visual devices rather than a verbal caller and is played by hearing impaired persons.

Part II
Permits

11VAC15-22-20. Eligibility for permit to conduct charitable gaming; when valid; permit requirements.

A. The conduct of charitable gaming is a privilege that may be granted or denied by the department. Except as provided in § 18.2-340.23 of the Code of Virginia, every eligible organization and volunteer fire department and rescue squad with anticipated gross gaming receipts that exceed $25,000 $40,000 in any 12-month period shall obtain a permit from the department prior to the commencement of charitable gaming activities. To be eligible for a permit an organization must meet all of the requirements of § 18.2-340.24 of the Code of Virginia.

B. Pursuant to § 18.2-340.24 B of the Code of Virginia, the department shall review a tax exempt request submitted to the IRS for a tax exempt status determination and may issue an interim certification of tax-exempt status solely for the purpose of charitable gaming, conditioned upon a determination by the IRS. A nonrefundable fee of $500 payable to the Treasurer of Virginia shall be charged for this review.

C. A permit shall be valid only for activities, locations, days, dates and times as listed on the permit.

D. In accordance with § 18.2-340.19 A 1 of the Code of Virginia, as a condition of receiving a permit, a minimum of 10% of charitable gaming gross receipts shall be used for (i) those lawful religious, charitable, community or educational purposes for which the organization is specifically chartered or organized or (ii) those expenses relating to the acquisition, construction, maintenance or repair of any interest in real property involved in the operation of the organization and used for lawful religious, charitable, community or educational purposes:

E. If an organization fails to meet the minimum use of proceeds requirement, its permit may be suspended or revoked. However, the department shall not suspend or revoke the permit of any organization solely because of its failure to meet the required percentage without having first provided the organization with an opportunity to implement a corrective action plan. In such a case, the organization shall be afforded the opportunity to enter into a consent order with the department specifying the proposed corrective action and the timeframe to accomplish the plan.

F. An organization may request a temporary reduction in the predetermined percentage specified in subsection D of this section from the department. In reviewing such a request, the department shall consider such factors appropriate to and consistent with the purpose of charitable gaming, which may include, but not be limited to (i) the organization's overall financial condition; (ii) the length of time the organization has been involved in charitable gaming; (iii) the extent of the deficiency; and (iv) the progress that the organization has made in attaining the minimum percentage in accordance with a corrective action plan pursuant to subsection E of this section.

G. An organization whose permit is revoked for failure to comply with provisions set forth in subsection D of this section shall be eligible to reapply for a permit at the end of one year from the date of revocation. The department, at its discretion, may issue the permit if it is satisfied that the organization has made substantial changes to its management, operations or both.

11VAC15-22-30. Permit application process.

A. Organizations anticipating gross gaming receipts that exceed $25,000 $40,000 shall complete a department-prescribed application to request issuance or renewal of an annual permit to conduct charitable gaming. The application shall be accompanied by a nonrefundable fee payable to the Treasurer of Virginia in the amount of $200. Volunteer fire departments or rescue squads or auxiliary units thereof that have been recognized in accordance with § 15.2-955 of the Code of Virginia shall be exempt from the payment of applications fees.

B. The department may initiate action against any organization exempt from permit requirements when it reasonably believes the organization is not in compliance with the provisions of charitable gaming laws or applicable regulations, or both, of the board.

C. Permit holders requiring a special permit pursuant to § 18.2-340.27 E of the Code of Virginia shall convey their request on a form prescribed by the department. There shall be a $50 fee for special permits. Volunteer fire departments or rescue squads or auxiliary units thereof that have been recognized in accordance with § 15.2-955 of the Code of Virginia shall be exempt from the payment of applications fees.

D. Permits shall be valid for a period of one year from the date of issuance or for a period specified on the permit. The department may issue permits for periods of less than one year.

E. Permits shall be granted only after a background investigation of an organization or interested persons, or both, to ensure public safety and welfare as required by § 18.2-340.25 of the Code of Virginia. Investigations shall consider the nature, the age and severity and the potential harm to public safety and welfare of any criminal offenses. The investigation may include, but shall not be limited to, the following:

1. A search of Virginia criminal history records for the chief executive officer and chief financial officer of the organization. Information and authorization to conduct these records checks shall be provided in the permit application. In addition, the department shall require that the organization provides assurances that all other members involved in the management, operation, or conduct of charitable gaming meet the requirements of subdivision 13 of § 18.2-340.33 of the Code of Virginia. Applications may be denied if:

a. Any person participating in the management of any charitable gaming has ever been:

(1) Convicted of a felony; or

(2) Convicted of any misdemeanor involving fraud, theft, or financial crimes within the preceding five years.

b. Any person participating in the conduct of charitable gaming has been:

(1) Convicted of any felony in the preceding 10 years, or

(2) Convicted of any misdemeanor involving fraud, theft or financial crimes within the preceding five years.

2. An inquiry as to whether the organization has been granted tax-exempt status pursuant to § 501 (c) by the Internal Revenue Service and is in compliance with IRS annual filing requirements;

3. An inquiry as to whether the organization has entered into any contract with, or has otherwise employed for compensation, any persons for the purpose of organizing or managing, operating or conducting any charitable gaming activity;

4. Inquiries into the finances and activities of an organization and the sources and uses of funds; and

5. Inquiries into the level of community or financial support to the organization and the level of community involvement in the membership and management of the organization.

F. The permit application for an organization that has not previously held a permit shall include:

1. A list of members participating in the management or operation of charitable gaming. For any organization that is not composed of members, a person who is not a bona fide member may volunteer in the conduct of a charitable game as long as that person is directly supervised by a bona fide official member of the organization;

2. A copy of the articles of incorporation, bylaws, charter, constitution or other appropriate organizing document;

3. A copy of the determination letter issued by the IRS under § 501(c) of the Internal Revenue Code, if appropriate, or a letter from the national office of an organization indicating the applicant organization is in good standing and is currently covered by a group exemption ruling. A letter of good standing is not required if the applicable national or state office has furnished the department with a listing of member organizations in good standing in the Commonwealth as of January 1 of each year and has agreed to promptly provide the department any changes to the listing as they occur;

4. A copy of the organization's most recent annual financial statement and balance sheet, or most recent Form 990 that has been filed with the IRS;

5. A copy of the written lease or proposed written lease agreement and all other agreements if the organization rents or intends to rent a facility where bingo is or will be conducted. Information on the lease shall include name, address, phone number of the landlord, square footage and maximum occupancy of the building and the rental amount per session; and

6. An authorization by an officer or other appropriate official of an organization to permit the department to determine whether the organization has been investigated or examined by the Internal Revenue Service in connection with charitable gaming activities during the previous three years.

G. Copies of minutes of meetings of an organization and any contracts with landlords or suppliers to which the organization is, or may be a party, may be requested by the department prior to rendering a permitting decision.

H. Organizations applying to renew a permit previously issued by the department shall submit articles of incorporation, bylaws, charter, constitution or other organizing document and IRS determination letter only if there are any amendments or changes to these documents that are directly related to the management, operation or conduct of charitable gaming.

I. Organizations may request permits to conduct joint bingo games as provided in § 18.2-340.29 of the Code of Virginia:

1. In the case of a joint game, all the organizations shall file a permit application.

2. The nonrefundable permit fee for joint games shall be a total of $200. Volunteer fire departments or rescue squads or auxiliary units thereof that have been recognized in accordance with § 15.2-955 of the Code of Virginia shall be exempt from the payment of applications fees.

3. A single permit shall be issued in the names of all the organizations conducting a joint game. All restrictions and prohibitions applying to single organizations shall apply to qualified organizations jointly conducting bingo games pursuant to § 18.2-340.29 of the Code of Virginia.

4. No charitable gaming shall be conducted prior to the issuance of a joint permit.

5. Applications for joint games shall include an explanation of the division of manpower, costs and proceeds for the joint game.

J. An organization wishing to change dates, times or locations of its charitable gaming shall request a change in the permit. Change requests shall be made in writing on a form prescribed by the department at least 30 days in advance of the proposed effective date.

K. Changes in dates, times or locations due to inclement weather, disasters, or other circumstances outside the organization's control may be made without a change in the permit. The organization shall request such a change on a form prescribed by the department as soon as the necessity for the change is known.

L. A nonrefundable fee of $50, payable to the Treasurer of Virginia, shall be submitted with a request for a permit change. The fee shall not be charged for changes as described in subsection K of this section. Volunteer fire departments or rescue squads or auxiliary units thereof that have been recognized in accordance with § 15.2-955 of the Code of Virginia shall be exempt from the fee for a permit change.

M. An organization may sell raffle tickets for a drawing to be held outside of the Commonwealth of Virginia in the United States provided:

1. The raffle is conducted by the organization in conjunction with a meeting outside the Commonwealth of Virginia or with another organization which is licensed to conduct raffles outside the Commonwealth of Virginia;

2. The raffle is conducted in accordance with these regulations and the laws and regulations of the state where the drawing is to be held; and

3. The portion of the proceeds derived from the sale of raffle tickets in the Commonwealth is reported to the department.

N. Any permitted organization that ceases to conduct charitable gaming shall immediately notify the department in writing, return its permit to the department, and provide the department a report as to the disposition of all unused gaming supplies.

Part VI
Fact-Finding Conferences and Hearings

11VAC15-22-110. Procedural rules for the conduct of fact-finding conferences and hearings.

A. Fact-finding conference; notification, appearance, conduct.

1. Unless automatic revocation or immediate suspension is required by law, no permit to conduct charitable gaming shall be denied, suspended or revoked except upon notice stating the proposed basis for such action and the time and place for a fact-finding conference, as set forth in § 2.2-4019 of the Administrative Process Act.

2. If a basis exists for a refusal to renew a suspension or a revocation of a permit, the department shall notify, by certified mail or by hand delivery, the interested persons at the address of record maintained by the department.

3. Notification shall include the basis for the proposed action and afford interested persons the opportunity to present written and oral information to the department that may have a bearing on the proposed action at a fact-finding conference. If there is no withdrawal, a fact-finding conference shall be scheduled at the earliest mutually agreeable date, but no later than 60 days from the date of the notification. Organizations or suppliers who wish to waive their right to a conference shall notify the department at least 14 days before the scheduled conference.

4. If after consideration of evidence presented during an informal fact-finding conference, a basis for action still exists, the interested persons shall be notified in writing within 60 days of the fact-finding conference, via certified or hand-delivered mail, of the decision and the right to a formal hearing. Parties to the conference may agree to extend the report deadline if more time is needed to consider relevant evidence.

B. Hearing; notification, appearance, conduct.

1. If, after a fact-finding conference, a sufficient basis still exists to deny, suspend or revoke a permit, interested persons shall be notified by certified mail or hand delivery of the proposed action and of the opportunity for a hearing on the proposed action. If an organization desires to request a hearing, it shall notify the department within 14 days of receipt of a report on the conference. Parties may enter into a consent agreement to settle the issues at any time prior to, or subsequent to, an informal fact-finding conference.

2. If an interested party or representative fails to appear at a hearing, the hearing officer may proceed in his absence and make a recommendation.

3. Oral and written arguments may be submitted to and limited by the hearing officer. Oral arguments shall be recorded in an appropriate manner.

C. Hearing location. Hearings before a hearing officer shall be held, insofar as practicable, in the county or city in which the organization is located. If the parties agree, hearing officers may conduct hearings at locations convenient to the greatest number of persons or by telephone conference, video conference or similar technology, in order to expedite the hearing process.

D. Hearing decisions.

1. Recommendations of the hearing officer shall be a part of the record and shall include a written statement of the hearing officer's findings of fact and recommendations as well as the reasons or basis for the recommendations. Recommendations shall be based upon all the material issues of fact, law or discretion presented on the record.

2. The department shall review the recommendation of the hearing officer and render a decision on the recommendation within 30 days of receipt. The decision shall cite the appropriate rule, relief or denial thereof as to each issue.

E. Agency representation. The director's commissioner's designee may represent the department in an informal conference or at a hearing.

NOTICE: The forms used in administering the above regulation are not being published; however, the name of each form is listed below. The forms are available for public inspection by contacting the agency contact for this regulation, or at the office of the Registrar of Regulations, General Assembly Building, 2nd Floor, Richmond, Virginia.

FORMS (11VAC15-22)

Annual Financial Report for Fiscal October 1 - September 30, DCG Form 101, rev. 9/24/04. Annual Financial Report, Form 101 (rev. 01/09).

2004 Exempt Organization Resolution, DCG Form 101-E, rev. 9/24/04.

Quarterly Financial Report, DCG Form 102, rev. 1/1/04 (rev. 01/09).

Quarterly Supplemental, DCG Form 102-A, rev. 1/1/04.

Bingo Session Reconciliation Summary, DCG Form 103, rev. 7/1/04 (rev. 07/08).

Bingo Admission Sales, DCG Form 104-A, rev. 7/1/04. Admission Sales Reconciliation Form – Paper, Form 104-A (rev. 07/08).

Floor Sales Reconciliation Form - Paper, DCG Form 104-B, rev. 7/1/04 (rev. 07/08).

Decision Bingo Reconciliation Form, DCG Form 104-C, rev. 7/1/03 (rev. 07/08).

Raffle or Treasure Chest Sales - (Bingo), DCG Form 104-D, rev. 7/1/03. Raffle/Treasure Chest Sales Reconciliation Form – Bingo Session, Form 104-D (rev. 07/08).

Instant Bingo/Seal Card Cards/Pull-Tabs Reconciliation Form, DCG Form 105, rev. 9/1/04 (rev. 07/08).

Instant Bingo/Seal Card Cards/Pull-Tabs Reconciliation Continuation Sheet Form, DCG Form 105-A, rev. 9/1/04 (rev. 07/08).

Storeroom Issue Sheet - Session, DCG Form 106, rev. 7/1/03. Storeroom Inventory Issue Form – Paper, Form 106-A (rev. 07/08).

Storeroom Inventory Issue Form – Instant Bingo/Seal Cards/Pull-Tabs, Form 106-B (rev. 07/08).

List of Volunteer Workers, DCG Form 107, rev. 7/1/03 (rev. 07/08).

Prize Payout Receipts, DCG Form 108, rev. 7/1/03. Prize Receipt, Form 108 (rev. 07/08).

Storeroom Inventory Form - Paper, DCG Form 109-A, rev. 7/1/03 (rev. 07/08).

Storeroom Inventory - Instants, DCG Form 109-B, rev. 7/1/03. Storeroom Inventory – Instant Bingo/Seal Cards/Pull-Tabs, Form 109-B (rev. 07/08).

Raffle Sales (Non-Bingo), DCG Form 110, rev. 7/1/03 (rev. 07/08).

Request for Extension for Filing the Annual Financial Report, DCG Form 117, rev. 9/24/04.

Bingo/Raffle Application - New Applicants Only, DCG Form 201(a), rev. 7/1/03. Charitable Gaming Permit Application – New Applicants Only, Form 201-N (rev. 07/08).

Bingo/Raffle Application - Renewal Applicants Only, DCG Form 201, rev. 8/8/03. Charitable Gaming Permit Application – Renewal Applicants Only, Form 201-R (rev. 07/08).

Bingo/Raffle Renewal Application - Fraternal Order of Elks, DCG Form 201 (Elks), rev. 7/1/03.

Exempt Organization - Notification New, DCG Form 202, rev. 7/1/03.

Exempt Organization - Notification Renewal, DCG Form 202(a), rev. 3/1/05.

Tax Information Disclosure Authorization, rev. 11/30/04 (rev. 07/08).

Permit Amendment, rev. 8/1/03 (rev. 07/08).

Gaming Personnel Information Update, rev. 7/1/03 (rev. 07/08).

Report of Game Termination, rev. 8/8/03 (rev. 07/08).

Charitable Gaming Bingo Caller Certificate of Registration Application, Form 401 (rev. 07/08).

Charitable Gaming Bingo Manager Certificate of Registration Application, Form 402 (rev. 07/08).

VA.R. Doc. No. R09-2007; Filed July 1, 2009, 9:59 a.m.