TITLE 16.ECONOMIC REGULATION

Part 4. TEXAS DEPARTMENT OF LICENSING AND REGULATION

Chapter 62. CAREER COUNSELING SERVICES

The Texas Department of Licensing and Regulation ("Department") adopts an amendment to 16 Texas Administrative Code, §62.80, concerning the fees for the Career Counseling Services program. Section 62.80 is adopted with changes to the proposed text as published in the March 22, 2002, issue of the Texas Register (27 TexReg 2164).

The Department is required by Texas Occupations Code, Chapter 51, §51.202 to set fees in amounts reasonable and necessary to cover the costs of administering programs, which include the Career Counseling Services program. The fees currently in place are below the amounts needed to cover program costs in current and future periods. Without the proposed increase in fee revenues, there could be an adverse impact on the administration and enforcement of the Career Counseling Services program.

The Department proposed to increase the fees for an original certificate of authority and a renewal certificate of authority from $1,000 to $2,400 each. The Texas Commission of Licensing and Regulation, at their May 23, 2002 meeting voted to change the proposed fee increase from $2,400 to $2,000.

The Department drafted and distributed the proposed rule amendment to persons internal and external to the agency. The Department wishes to thank these persons for participating in its rulemaking process and submitted comments. Below is a summary of comments received and the Department’s response.

Comment : The increase of $1,000 in the certificate fee for the Career Counseling Services program is excessive. Department Response: Disagrees. The suggested increase in the certificate fee is required to allow the Department to properly administer and effectively enforce the Career Counseling Services program. Currently the certificate fee is set at $1,000 which is an amount insufficient to cover the costs of administering the Career Counseling Services program.

Comment : The increase of $1,000 in the certificate fee for the Career Counseling Services program is unreasonable and exclusionary and will be harmful to many small career counseling services companies. It would be more equitable and better serve the Department’s need to cover administrative costs if each and every career counselor in large firms were charged the same fee. Department’s Response: The Department disagrees. The Department must determine the amount of the certificate fee for each occupation it regulates based on the cost to administer that program. The increase in the fee for the certificate is reasonable and necessary to cover the costs of administering the program, and is therefore warranted by the Texas Occupation Code, Chapter 51.202. Currently the statute requires that the owner of a Career Counseling Service Company must be the holder of a certificate issued by the Department. In order to require every career counselor in every firm to become certified by the Department, it would require a change to the statute by the legislature.

The cost of compliance and the anticipated economic effect on small businesses and other persons who are required to comply with this section as adopted will be an increase of $1,000 per year for persons filing a request with the Department for an original certificate of authority or a renewal certificate of authority. The fee changes will take effect September 1, 2002. They will apply to licenses and certificates that expire on or after September 1, 2002. They also will apply to all applications (both initial and renewal) filed with the Department on or after September 1, 2002. The adopted fee increase should enhance the future administration and enforcement of the Career Counseling Services program.

The amendment is adopted under Texas Occupations Code, Chapter 51, §51.202 which authorizes the Texas Commission of Licensing and Regulation to set fees in amounts reasonable and necessary to cover the costs of administering the programs and activities under its jurisdiction which includes the Career Counseling Services program.

The statutory provisions affected by the adoption are those set forth in Texas Civil Statutes, Article 5221a-8 and Texas Occupations Code, Chapter 51. No other statutes, articles, or codes are affected by the adoption.

§62.80.Fees.

(a) Original and renewal certificate of authority fee--$2,000.

(b) Late fee--$50.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on June 17, 2002.

TRD-200203773

William H. Kuntz, Jr.

Executive Director

Texas Department of Licensing and Regulation

Effective date: September 1, 2002

Proposal publication date: March 22, 2002

For further information, please call: (512) 463-7348

Part 9. TEXAS LOTTERY COMMISSION

Chapter 401. ADMINISTRATION OF STATE LOTTERY ACT

Subchapter B. LICENSING OF SALES AGENTS

The Texas Lottery Commission adopts amendments to 16 TAC §§401.152, 401.153, 401.155 - 401.157, and 401.159, the repeal of §§401.151, 401.154, and 401.158; and new §401.158 and §401.160. New §401.160 is adopted with changes to the proposed text as published in the May 10, 2002, issue of the Texas Register (27 TexReg 3885). The changes are to correct an incorrect reference to a rule provision in 16 TAC §401.160(e) and to correctly reflect the reference to subsection (g) of 16 TAC §401.160 as well as to incorporate by reference the applicability of §401.160(g) to §401.158 and §401.160. The amendments to §§401.152, 401.153, 401.155 - 401.157, and 401.159, repeal of §§401.151, 401.154, and 401.158; and new §401.158 are adopted without changes and will not be republished.

The rulemaking is on rules contained within Subchapter B. Specifically, the amendments make the rules consistent with existing law and clarify current agency practices and procedures relating to the licensing of sales agents.

The amendments, repeal, and new rules eliminate redundant or obsolete language, update rules to current agency practice, and provide guidance to licensees, administrative law judges, and the commission regarding the imposition of administrative penalties against licensees. In addition, the adoption of amendments to §401.153 by adding subsection (e), promotes efficiency and reduces costs to the agency by allowing for agency discretion in the placement of particular types of lottery terminals and/or other lottery equipment at licensed locations. Additionally, the repeals eliminate language that is redundant to language in the State Lottery Act or other Commission rules, inconsistent with corresponding language in the State Lottery Act, inconsistent with current agency practice, or because provisions of the rule are being revised so significantly that it is more efficient to repeal the rule and adopt a new rule.

No comments were received regarding adoption of the amendments, repeals, and new rules.

Government Code §2001.039, and the General Appropriations Act, Article IX, §9-10.13, 76th Legislature (1999), requires each state agency to review and consider for readoption each rule adopted by that agency pursuant to the Government Code, Chapter 2001 (Administrative Procedures Act). 16 TAC Chapter 401 has been reviewed in its entirety and the Commission determined that reasons for adopting certain sections continue to exist. The certain sections that have been readopted pursuant to Commission Order No. 00-0004, dated January 28, 2000, are set out in Exhibit "A" to the Order. The notice of the proposed rule review was published in the November 12, 1999, issue of the Texas Register , (24 TexReg 10149.) No comments were received regarding the agency's rule review of Chapter 401. The adoption of this rulemaking is consistent with and the result of the agency's rule review.

Specifically, the repeal to delete the existing 16 TAC §401.151 is because the language in the rule is redundant to language in the State Lottery Act. 16 TAC §401.154 is repealed because the language in this rule is better suited to be incorporated into other rules. For example, subsections (a) and (b) are being moved to §401.153(e) and subsection (c) is moved to §401.152(d). 16 TAC §401.158 is revised so significantly that it is more efficient to repeal the rule and propose new rule, §401.158. The new rule §401.158 incorporates, in one rule, the reasons for disciplinary action against a licensee. 16 TAC §401.160 sets out a standard penalty chart the agency will use in determining an appropriate administrative penalty against a licensee.

16 TAC §§401.151, 401.154, 401.158

The repeals are adopted under Government Code, Chapter 466, §466.015 which authorizes the Commission to adopt all rules necessary to administer the State Lottery Act and to adopt rules governing the establishment and operation of the lottery, and under Government Code, §467.102 which authorizes the Commission to adopt rules for the enforcement and administration of the laws under the Commission's jurisdiction.

The repeal affects Government Code, Chapter 466.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on June 11, 2002.

TRD-200203662

Kimberly L. Kiplin

General Counsel

Texas Lottery Commission

Effective date: July 1, 2002

Proposal publication date: May 10, 2002

For further information, please call: (512) 344-5113

16 TAC §§401.152, 401.153, 401.155 - 401.160

The amendments and new rules are adopted under Government Code, §466.015 which authorizes the Commission to adopt all rules necessary to administer the State Lottery Act and to adopt rules governing the establishment and operation of the lottery, and under Government Code, §467.102 which authorizes the Commission to adopt rules for the enforcement and administration of the laws under the Commission's jurisdiction.

§401.160.Standard Penalty Chart.

(a) The commission, through the director of the Lottery Operations Division, may offer settlements to persons charged with violating the provisions of the State Lottery Act or rules of the commission. Settlement of those cases, unless otherwise provided for elsewhere in this rule, shall be in compliance with the following standard penalty chart. A settlement will be in the form of an Agreement and Consent Order of the commission.

(b) A repeat violation by a licensee justifies the penalty for a second or third violation if it occurs within 12 months of the first violation. Violations need not be the same or similar in nature to previous violations to be considered repeat violations.

(c) A penalty for an alleged repeat violation shall not be assessed unless the alleged violation occurs after the licensee has been notified, in writing, of the first alleged violation. Notwithstanding the preceding sentence, if an alleged violation is discovered during an undercover operation, then no notice of any prior alleged violations may be necessary to assess a penalty for a repeat violation. The requirement that written notice be given to a licensee shall not be interpreted to require that a notice of hearing for the violation be delivered to the licensee.

(d) The list of violations in the standard penalty chart is not an exclusive list of violations of the commission or rules of the commission. The commission is authorized to assess penalties for any violation of any of the foregoing statutes or rules for which a penalty is not provided on the chart. Any penalty assessed for a violation not provided for on the standard penalty chart shall be approved by the director of the Lottery Operations Division or his/her designee prior to its assessment.

(e) Any person responsible for assessing a penalty for a violation may deviate from the standard penalty chart if mitigating circumstances are involved and consideration will be given to all the factors listed in subsection (g) of this section. If a recommendation deviating from the standard penalty chart is made, it must be made in writing and be filed with the case report. Final approval shall be made by the director of the Lottery Operations Division or his/her designee.

(f) The standard penalty chart does not bind an administrative law or the commission as to penalties for any violation determined to have occurred by the facts presented in an administrative hearing and the record of that proceeding shall be the determining factor as to the sufficiency of the penalty assessed.

(g) Based upon consideration of the following factors, the commission may impose penalties other than the penalties recommended in §401.158 of this title (relating to Provisional License) and/or this section:

(1) Severity of the offense;

(2) Danger to the public;

(3) Number of repetition of offenses;

(4) Number of complaints previously found justified against the licensee;

(5) Length of time the licensee has held a license;

(6) Actual damage, physical or otherwise, caused by the violations;

(7) Deterrent effect of the penalty imposed;

(8) Attempts by licensee to correct or stop violations or refusal by licensee to correct or stop violations;

(9) Penalties imposed for related offenses; or

(10) Any other mitigating or aggravating circumstances.

Figure: 16 TAC §401.160(g)(10)

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on June 11, 2002.

TRD-200203661

Kimberly L. Kiplin

General Counsel

Texas Lottery Commission

Effective date: July 1, 2002

Proposal publication date: May 10, 2002

For further information, please call: (512) 344-5113

Chapter 402. BINGO REGULATION AND TAX

16 TAC §402.554

The Texas Lottery Commission adopts the repeal of §402.554, relating to instant bingo without changes to the proposal as published in the May 10, 2002, issue of the Texas Register (27 TexReg 3890) and will not be republished.

The rule provided for play of pull-tab bingo in Texas. Contemporaneous with the repeal of this section, the Commission adopts new §402.554 because the changes to the rule are so substantial that it is less confusing to the reader of the rules to adopt a new rule. The new §402.554 will provide new game styles and generate additional revenue for charitable organizations and the State of Texas.

No comments were received regarding repeal of this section.

The repeal is adopted under the Government Code, §467.102 and the Occupations Code, §2001.054 which provide the Commission with the authority to adopt rules for the enforcement and administration of the laws under the Commission's jurisdiction.

The repeal implements Occupations Code, Chapter 2001.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on June 11, 2002.

TRD-200203663

Kimberly L. Kiplin

General Counsel

Texas Lottery Commission

Effective date: July 1, 2002

Proposal publication date: May 10, 2002

For further information, please call: (512) 344-5113

16 TAC §402.554

The Texas Lottery Commission adopts new §402.554 relating to pull-tab bingo with changes to the proposed text as published in the May 10, 2002, issue of the Texas Register (27 TexReg 3891). The changes are in response to comment received and are throughout the rule. Specifically, the new section identifies the different forms of pull-tab bingo that can be played in Texas. The new section sets out the standards that must be met for approval of pull-tab bingo tickets, the reasons for disapproval of pull-tab bingo tickets, manufacturing requirements, sales and redemption requirements, authority to inspect the pull-tab bingo tickets, records requirements, and the different styles of play.

The new section authorizes different play styles of pull-tab bingo tickets that will have the potential to generate additional revenue for charitable organizations that will be distributed for charitable purposes and additional revenue to the State of Texas. Also, bingo players will have the opportunity to play new game styles.

The agency received comments both oral and written. The Commission conducted a public hearing on May 31, 2002 to receive comment on the new rule. All comment was generally in favor of the proposed new rule.

One commenter offered the following comments on behalf of the National Association of Fundraising Ticket Manufacturers (NAFTM). Specifically, subsection (a)(14) defines "prize amount" and appears to require the manufacturer to determine the fair market value of a non-cash item (i.e. a merchandise prize). The rule, as proposed, does not accurately reflect how merchandise prizes are valued and fails to account for those prizes that may be supplied by distributors or by the organization conducting the game. The manufacturer devises the payout structure for the game, which specifies the number of prizes and the various prize amounts. For example, in a merchandise game, the manufacturer may build a game so that there are the following prize amounts: $500; $250; $250; and many smaller cash prizes. These top three prizes are designed to be merchandise prizes. The merchandise prizes may be supplied by the manufacturer, the distributor or by the organization itself. Whoever supplies the prize should be required to establish the fair market value of the prize and the fair market value must be consistent with the prize structure developed for the game. The commenter offered alternative language as follows: "Prize amount. The value of cash and/or the fair market value of merchandise which is awarded as a prize. A collectible item is considered merchandise for determining allowable prize amounts. If a manufacturer or distributor supplies a merchandise prize, the manufacturer or distributor must determine the fair market value of the merchandise prize, otherwise the fair market value of a merchandise prize must be determined by the authorized organization." The commenter suggests that in this revised version, it makes sense to refer to merchandise since that term is already defined in the proposed rule.

Agency response: The Commission agrees with commenter's suggested new language. The intent provides for greater flexibility and clarification of who can provide merchandise prizes while ensuring that the fair market value of said prize is maintained and the merchandise prizes are consistent with the prize structure developed for the game by the manufacturer.

Comment: The commenter also offered comments relating to subsection (b). Specifically, the commenter indicated that the subsection addresses the approval of pull-tab bingo tickets and specifies the information that must be printed on the ticket to ensure approval. The commenter indicated that subsection (b)(3)(A) requires each ticket to bear an impression of the commission's seal and the words "Texas Lottery Commission" engraved around the margin. The commenter proposes the deletion of this requirement. The commenter indicated that Texas is only one of two states in the nation that requires each ticket in a deal to bear a seal (the other is New Hampshire). The seal is unnecessary as a regulatory tool, and has a tendency to limit the variety of pull-tab bingo games available for sale in Texas. Pull-tab bingo games all bear serial numbers, which can be tracked by the manufacturers for at least a period of three years. As virtually every other regulatory jurisdiction has found, a seal provides no assurance that the game is approved nor legitimately sold. It can, in fact, provide false assurance to an investigator who relies only on the presence of the seal and does not examine the serial number or the sales invoice for the game. The commenter encourages the Commission to review the standards developed by the North American Gaming Regulators Association (NAGRA), for pull-tabs. The standards are comprehensive and have been adopted in virtually every jurisdiction that authorizes and regulates pull-tab bingo. The standards do not require a ticket seal nor do they require any individual ticket marking for security purposes. The standards rely on serial number reporting, a mechanism that has been proven effective in a myriad of jurisdictions. One of the primary motives for adoption of the proposed rule is to increase the type of pull-tab bingo games available for Texas charities. The existence of the seal is an example of an overly restrictive rule that, if eliminated, would benefit charities by increasing the variety of existing types of instant bingo games in the state. This, in concert with the addition of new types of games, could have a very beneficial effect on the charities' ability to raise funds with pull-tab bingo tickets. Pull-tab bingo tickets specially printed for Texas bearing the TLC seal are of little market value in another state. Therefore, manufacturers tend to produce only that amount of product that is likely to be sold in Texas and tend to limit the volume of the product to avoid being laden with excessive inventory. Elimination of the TLC seal would open the door to Texas charities to a greater variety of pull-tab bingo games. Greater variety typically translates into greater sales. Greater sales means more money for charity.

Agency response: The Commission disagrees with the commenter's suggestion. The Commission has examples of tickets bearing regulatory language or seals from states such as California, Connecticut and Michigan, in addition to New Hampshire. Several of those jurisdictions indicated that the reason they required their language or seal to be placed on pull-tab tickets was as a result of illegal pull-tab games being provided in their state. The Commission disagrees with the commenter's suggestion that the seal "...provides no assurance that the game is approved...." In fact, the Commission believes that the absence of the seal on a ticket provides a very clear indication to agency staff, licensees and players that a game may not be authorized for use in this state. The Commission believes that each manufacturer should be prepared to manufacture pull-tab bingo tickets specific to a particular jurisdiction's requirements. As recently as the May 2002, edition of the Bingo Manager Magazine, a representative from a manufacturer is quoted as saying "...each region has its own regulations that must be met to win government approval before the tickets can be offered for sale." Bingo Manager is published monthly as a supplement to Gaming Products & Services magazine. Bingo Manager focuses on new products and services and management trends for the profitable operation of bingo halls, charitable gaming operations, high stakes bingo operations and Native American Bingo Operations. Because of the high degree of connectivity between high stakes bingo and Native American gaming, Bingo Manager is provided to Tribal Councils throughout the North American continent as well as the management of all bingo or pull-tab related gaming operations. Information relating to the circulation of Bingo Manager is as follows:

CIRCULATION

Circulation is 10,000

Business Analysis of Circulation

Casinos ...........................46%

High-Stakes Bingo ............11%

Charitable Bingo ..............15%

Native American Casinos ...7%

Riverboat Casinos ..............4%

Cruise Ships......................3%

Regulators.........................4%

Manufacturers and Distributors..........7%

Other (Route, Technicians, Consultants).................3%

Additionally, the commenter compared the state seal to the serial number which is an invalid comparison. The Commission disagrees with the commenter's statements regarding the limitations on the type of pull-tabs that would be available to the Texas market due to the seal requirement. The commenter did not provide specific information. The commenter provided no specific information regarding the direct benefits that charities would receive in the form of reduced costs from the manufacturer for pull-tabs should the seal be eliminated. Finally, the commenter suggested that the Commission review the standards developed by the North American Gaming Regulators Association (NAGRA), for pull-tabs. The Commission, through its staff, did review the NAGRA standards and determined that the standards provided by NAGRA "...are intended to provide regulatory guidance to jurisdictions...." (emphasis added) Additionally the NAGRA standards refer to "minimum information" to be printed on a pull-tab ticket. The Commission believes that the NAGRA standards and minimum requirements have been incorporated into this rule. The Commission also believes that the NAGRA standards were not intended to be definitive or limiting in nature but were intended to provide for each jurisdiction's unique requirements. Finally, the Commission finds the commenter's statement that "...manufacturers tend to produce only that amount of product that is likely to be sold in Texas and tend to limit the volume of the product to avoid being laden with excessive inventory" to be inconsistent with comments made by manufacturers, some of whom are licensed in Texas, in the August 2001 edition of Bingo Manager magazine. This article talks about manufacturers producing games specific to a regional preference and the fact that "very different" player preferences exist from state to state. This would seem to indicate that manufacturers are accustom to producing products specific to a market.

Some commenters also offered comment regarding subsection (b)(3)(E) and indicated that it specifies additional information that must be printed on each pull-tab bingo ticket. The commenters are not opposed to including on each ticket the prize amount, the number of winners for each prize amount, or the cost per ticket. However, the commenters are opposed to the inclusion of the ticket count on each individual ticket. Again, like the seal, this requires specialized printing only for the State of Texas. No other state requires the ticket count for the deal to appear on each ticket in the deal. The standards adopted by the North American Gaming Regulators Association (NAGRA) for Pull-tabs do not require the ticket count to be printed on each ticket. The ticket count is included on the flare for the game and each game is packaged with a matching, accompanying flare. A player interested in the ticket count of the game only has to look at the flare for the information. Agency response: The Commission disagrees with the commenter. As previously mentioned, the NAGRA standards for pull-tabs reference the minimum information to be included on a ticket. (emphasis added) The commenter states that a player interested in the ticket count of the game only has to look at the flare for the information. The rule does not require that the flare be posted in all incidents. Therefore, the Commission believes that, by including the ticket count on each individual ticket, the ticket count provides the player additional information regarding the games they purchase. Finally, the commenter's statement that "no other state requires the ticket count for the deal to appear on each ticket in the deal" is inaccurate. Commission staff have in their possession tickets from another state that contain the ticket count on each ticket.

Comment: Some commenters also offered comment regarding subsection (b)(7) and indicated that it requires a manufacturer to notify the Commission if an approved pull-tab bingo game is discontinued or no longer manufactured for sale in Texas. The commenters encourage the deletion of this requirement because a manufacturer may put a game on a "discontinued" list at some point in time, but may have significant amounts of inventory of the product that is destined for sale into Texas. In addition, a discontinued product may be in the hands of a distributor or distributors for many months or even years before it is sold to an organization. This language is difficult to interpret, difficult to enforce and rife with the potential for inconsistency. It is also unnecessary. No other state has such a requirement. In the alternative, the commenter encourages the Commission to develop language that makes it clear that a manufacturer's decision to discontinue production of a particular game does not mean that the game may not continue to be sold from inventory. The commenters offer the following language to be added to this subsection: "Notification that a game has been discontinued does not preclude a manufacturer, distributor or authorized organization from continuing to sell any deals produced prior to the date the game was discontinued." Another commenter also offered alternative language to say "if a pull-tab is no longer available to sell in Texas".

Agency response: The Commission disagrees with commenters' suggestion that this requirement is unnecessary and should be deleted from the rule. Manufacturers currently comply with this provision and notify the Commission when a game is discontinued or no longer produced. The Commission does agree with the language to be added to subsection (b)(7) clarifying the fact that inventory produced or sold prior to the discontinue date may continued to be sold. The specific language with which the Commission agrees and will include in the rule, as part of subsection (b)(7), is: "Notification that a game has been discontinued does not preclude a manufacturer, distributor or authorized organization from continuing to sell any deals produced prior to the date the game was discontinued." The Commission also will include language in subsection (b)(7) that states: "A manufacturer may reactivate a discontinued game by submitting a request to the commission with a statement that the artwork for the discontinued game has not changed and by submitting the appropriate number of deals for testing from the next print run from the reactivated game. If the manufacturer does want to reactivate a game and make changes to the artwork then the artwork must be resubmitted for approval."

Comment: The commenter also offered comment regarding subsection (d)(11) and indicated that it appears to combine the requirements of (7) and (10). Sealing the deal and shrink wrapping the deal are separate and distinct acts and should not be combined or confused. Sealing a product will ensure its integrity. Shrink wrap exists to protect the flare, which is affixed to the outside of the container under the shrink wrap, and to minimally protect the container. It is not a substitute for sealing the deal with a tamper resistant seal or tape. Shrink wrap occasionally rips during normal handling and shipping without any negative effect on the product. The commenter encourages the Commission to revise this subdivision as follows: "A manufacturer in selling or providing pull-tab bingo tickets to a distributor shall shrink-wrap each deal completely in a clear wrapping material."

Agency response: The Commission agrees with the commenter in part. Subsection (d)(10) relates the minimum prize payout of the pull-tab bingo ticket and not to the packaging requirements. The commenter's suggestion will be incorporated in the rule to clarify the difference between the sealing of the deal and the shrink wrapping of the deal.

Comment: The commenter also offered comment regarding subsection (d)(12)(C) and indicated that this subsection prevents the determination of a winning or losing ticket by any means other than the physical removal of the perforated tabs. This language is inconsistent with the event ticket games and sign up games where the winners are determined by the opening of a seal, the draw of a bingo ball or the spin of a paddle wheel. The commenter recommends that the language be revised as follows: "prevent the determination of a winning or losing instant pull-tab bingo ticket by any means other than the physical removal of the perforated window tabs by the player....."

Agency response: The Commission disagrees with the commenter's remarks relating to the inconsistency with the event ticket or sign up game. Each game, even an event ticket, requires the player to open the tabs on a pull tab ticket.

Comment: The commenter also suggests deletion of Subdivision (d)(11)(D) that requires the Commission's seal to be place on each ticket only by a licensed manufacturer for all the reasons noted above.

Agency response: The Commission disagrees with the commenter's suggestion for the reasons the Commission has previously stated regarding the Commission's seal requirement.

Comment: The commenter also offered comment on subsection (h) that dictates the style of play for pull-tab bingo games. Paragraph (6) describes "event ticket". The commenter recommends that this provision be revised as follows: "Event ticket. A form of pull-tab bingo where the winner(s) are determined by some subsequent action such as a bingo ball draw, spin of a paddle wheel, opening of a seal on a flare(s) or any other method so long as that method has designated numbers, letters, or symbols that conform to the randomly selected numbers or symbols. An event ticket game must contain more than two (2) instant winners." The commenter indicated that the revisions make it clear that event games are a form of pull-tab bingo so that all of the various construction standards apply. The revision also incorporates the definition of "bingo ball draw" and uses "paddle wheel" as the spinning wheel. Again, paddle wheel is controlled, "spinning wheel" is not.

Agency response: The Commission disagrees with the commenter because it seems that what commenter suggests is taking current language contained in the rule and rearranging it, resulting in no substantive change.

The commenter also indicated that, as a general comment, the commenter had reviewed State Board of Insurance v. Deffebach, 631 S.W.2d 794 (Texas Ct. App. 1982). Adoption of the suggested revisions noted above would not violate the standards set forth in that case. The above changes, if adopted, would be the result of public comment on the proposed rule, would not affect different subjects of regulation nor affect new parties.

Agency response: The Commission agrees.

Another commenter offered comment on behalf of 953 clients. The comment contained in the chart format references the proposed rule after the commenter formatted it to include line and page number for convenience in connection with comments relating to recommended clean up changes.

Figure: 16 TAC Chapter 402--Preamble

Agency response: The Commission agrees and the suggested changes have been made to the rule.

Comment: The commenter also offered the following comment. The rule should allow a manufacturer to place the information that is required on a pull tab on either the front of the pull tab or the reverse, but should not require any particular information to be placed on either the front or the reverse of the pull tab. In other words, as long as the minimum required information is on the pull tab, it should not matter what information is on the front of the pull tab or reverse, so long as the minimum required information is on the pull-tab. In this way, manufacturers could create different and innovative products.

Agency response: The Commission disagrees with the commenter's suggestion. The requirement to have certain information placed in a specific location creates consistency among tickets printed by a variety of manufacturers. The language in the rule is consistent with current manufacturing standards in the State of Texas. Allowing individual manufacturers to decide where to place information would create inconsistencies among tickets This consistency creates a sense of uniformity to players when they purchase pull-tab bingo tickets... Players accustom to finding information in a specific location could be potentially confused Additionally, the uniformity is beneficial from an audit perspective because auditors will be able to know exactly where to look for the requisite information.

Comment: Eliminate the word "paddle" in connection with wheel. The concept of a paddle wheel ticket is that the ticket is drawn by the spinning of a wheel, not necessarily a paddle wheel.

Agency response: The Commission agrees.

Comment: Add the following new language as subsection (h)(8): Multiple Part Event or Multiple Part Instant Ticket. An event ticket that is broken apart and sold in sections by a licensed authorized organization. Each section of the ticket consists of a separate deal with its own corresponding payout structure, serial number, and winner verification.

This new language would allow the use of pull-tab tickets that are popular in California. The sale of these tickets goes quickly, resulting in a quick determination of winners, thereby creating new excitement.

Agency response: The Commission agrees with the commenter's suggestion.

Comment: Content restrictions.

In subsection (c)(1), first sentence, strike the words "the integrity or".

The Commission should not be the politically correct police. In the past, the Commission has rejected pull tabs that: a) contain the words "gringo bingo"; b) have a frosted mug symbol; c) have a symbol bearing the likeness of a gun; d) have a symbol bearing the likeness of a hunting scope with crosshairs; and e) have a symbol that contains the likeness of a knife. Guns, hunting scopes, and knives are all legal to sell, possess, and use in the State of Texas. The same is true for a frosted mug beverage, be it a beer or a root beer. These items are readily advertised in newspapers, magazines, on billboards, the Internet, and by the Texas Parks & Wildlife Department publication. The symbols are contained in comic books that are marketed and sold to kids all over the state and this country. It is indeed a slippery slope the Commission has climbed when it is deciding what language or symbols are approved as opposed to letting the market decide.

One of the Commission's most popular lottery scratch off tickets currently is the Harley Davidson motorcycle game. In certain circles, motorcycles have a negative connotation. If the Commission is going to reject guns and/or knives, then my clients believe the Commission should likewise reject the Harley Davidson scratch off game.

The commenter suggests that the Commission has no statutory authority to reject pull tab symbols that contain a frosted mug and a weapon of any sort. The Commission's statutory language found in §2001.051 states that "the Commission has broad authority and shall exercise strict control and close supervision over all bingo conducted in this state so that bingo is fairly conducted and the proceeds derived from bingo are used for an authorized purpose." The commenter indicates there is no legislative authority for the Commission to act as the thought police, politically correct police, or the good taste police and is unaware of any legislative history that would suggest that the Commission has this authority.

Agency response: With regard to the suggestion that subsection (b)(3)(G) be deleted because many of the symbols prohibited in this subsection are readily available to persons of all ages, that the symbols are subject to interpretation and that the elimination of these symbols may adversely affect the number and type of games offered in Texas, the commenters provided no substantial alternative language nor did the commenters provide specific information regarding the number or types of games that may be affected. The Commission disagrees with the commenters' suggestion to delete this subsection. The May 2002 edition of Bingo Manager magazine states in part: "One thing you have to stay away from in designing pull tabs is poor taste, " says Arrow International's Bill Fulton, vice president of marketing. "Some may think being a little risque helps sell tickets, but you must remember your market. Pull tabs have to promote the good things charitable gaming does, which range from churches and schools raising money for sports uniforms to service organizations helping acquire equipment for a neighborhood health center. A negative product detracts from the fun and worthy goals of charitable gaming." Additionally, pursuant to Government Code, §467.101, the Commission has broad authority and shall exercise strict control and close supervision over all activities authorized and conducted in Texas under Occupations Code, Chapter 2001. The Commission believes that certain artwork on a pull-tab submitted for approval should not be approved for use in Texas because it is objectionable and affects the integrity of the bingo game. Examples include profanity and nudity and may include other artwork that is objectionable. The Commission is mindful that charitable bingo in Texas is gambling and, as such, should be and is subject to strict control and close supervision. The Commission, if it disapproves art work on the basis that the art work is objectionable, is doing so because it believes, in part, that it adversely impacts the integrity of the bingo gaming operations. Further, the placement of the Texas Lottery Commission seal on bingo paper and pull-tab products serves as an indication to licensees and the public that those products have been inspected and approved by the State of Texas. Specifically that those products meet certain standards in terms of construction, packaging and other controls such as minimum prize payouts and the random placement of pull-tabs within a deal to ensure no player has an unfair advantage over another as it relates to the selection of a winning pull-tab. The placement of objectionable graphics on pull-tabs could be seen as an endorsement by the state of those graphics.

The commenter has referenced certain symbols and stated that those products are legal in the state and are advertised. However the commenter fails to mention that those products, such as guns and alcoholic beverages, contain limitations and restrictions imposed on the state. For example, there are countless restrictions regarding alcohol in Texas such as age limits, restrictions on the sale of alcohol, and restrictions on the service of alcohol. Regarding the comments in connection with guns, there are limits on who can purchase a gun. A person can carry a concealed handgun but only if permitted by the state and with certain restrictions. Even if a person is licensed to carry a handgun, there are still locations where the possession of a concealed handgun is not permitted.

Finally, the commenter states that the symbols that would be prohibited by this rule are "...contained in comic books that are marketed and sold to kinds all over the state and this country." What the commenter has failed to do is differentiate between comic books and the product that this rule regulates. This rule does not relate to the publication of comic books for children. This rule relates to the production, distribution and sale of gambling products.

Comment: Strike the words "that must not exceed $1.00" in subsection (b)(3)(E). There is no statutory provision limiting the sales price of a pull tab to $1.00 except a pull tab dispensed in a pull tab dispenser, §2001.410(b) of the Texas Government Code.

Agency response: The Commission agrees with the commenter's suggestion to eliminate the reference in the proposed rule to a $1 limit. However, should the sale of pull-tab bingo tickets violate §2001.410(b) of the Bingo Enabling Act that is a violation of state law subject to prosecution.

Comment: In subsection (a)(13), in the definition of prize, include as a prize bonus pull tabs. Certain pull tab games available in other states award as a prize bonus pull tabs that have proven to be extremely popular.

Agency response: The Commission agrees.

Comment: In subsection (d)(7), add the word "instant" immediately after the word "winning" such that the sentence now reads: "All high tier winning instant pull-tab bingo tickets must utilize a secondary form of winner verification." This will clarify that this subsection applies to high tier pull tab tickets. High tier has been defined in subsection (a)(6).

Agency response: The Commission agrees. For "legislative history" purposes, a sign-up board, as defined in subsection (h)(1), and a sign-up board ticket, as defined in subsection (h)(2), are what the industry commonly refers to as "seal tickets."

Agency response: The Commission agrees.

Comment: Positive benefits from new rule.

$ Increased revenue to charity

$ Increased revenue to State in the form of 5% prize fees, sales tax Based upon sales and revenue data experienced by charities in Louisiana that aggressively market pull tabs like the ones that would be available in the Texas market with the adoption of the new rule, the State of Texas can expect to receive over $40 million in additional revenue. Suzanne Taylor, during the April 2, 2002 Bingo Advisory Committee meeting, made a presentation showing the favorable economic activity that occurs with innovative pull tabs that are aggressively marketed by charities.

The assumptions used to formulate the increased revenue include where new games are allowed to be played and marketed during bingo occasions. It is expected that approximately 2 of all bingo occasions would adopt the new games. Where new games are adopted, an increment in sales of pull tabs and related products of approximately three (3) times the current sales is experienced. In halls that have the new games and tickets, an additional sales person would be employed for each bingo occasion. An average wage for the additional person is $60 per occasion. The summary of the increased revenue and economic activity is the following:

Additional net funds available to charities: $31, 900,859

Additional sales tax to State: $152,880

Additional prize tax to State: $4,431,785

Dollar value of additional employment-direct:

(approximately 136 full-time jobs at $30,000 annually) $4,068,840

Grand Total: $40,554,364

Agency response: The Commission anticipates that the adoption of the rule will result in the potential increase of pull-tab sales; but, the Commission is not able to estimate that amount of additional revenue to the organizations conducting bingo or the state. The Commission would point out two key phrases from the commenter's suggestions. The first relates to the statement regarding the "...charities in Louisiana that aggressively market pull tabs like the ones that would be available in the Texas market with the adoption of the new rule,...." The amount of sales resulting from the introduction of these games will be a direct result of the charities in Texas ability to market and sell the product. The second key phrase regards the "assumptions" used in achieving the figures relating to increased sales that the commenter provided. Those figures are just assumptions and the commenter provided no backup for the figures other than their "experience."

Comment: One commenter offered comment on behalf of the Bingo Interest Group. Specifically, this commenter and others offered the following comment or similar comment regarding merchandise prizes.

Merchandise prizes

The definition of "merchandise" in the proposed rule in effect requires that merchandise offered as a pull tab bingo prize be obtained by the conducting organization from a licensed bingo distributor. The commenter supports the Commission's proposal to allow merchandise to be used as a pull-tab prize in lieu of cash prizes. This will allow for variety and innovation and should find acceptance among some players who will be drawn to the opportunity to win a particular merchandise prize. However, the commenter thinks a charity conducting bingo ought to be able to obtain merchandise offered as a prize from whomever the charity can get the best value. The purpose of the new rules is to create additional opportunities to enhance the bingo operations of Texas charities, not to create an additional line of business for distributors. The best and broadest array of opportunities for charities would be for them to be free to obtain prizes from the entire spectrum of the market place for such merchandise. Certainly a licensed bingo distributor could be one competitor in that market place, but so could be an appliance wholesaler, for example.

The commenter offered the following example to illustrate the "merchandise prizes" comment. There are seven charities licensed to play at a given location. Each licensed charity holds 106 sessions per year at which pull tabs with a merchandise prize are sold. The charities offer televisions with a retail value of $500 as one of the prizes. That is the potential for 742 nice televisions to be given away, but, of course, a television won't be won in every session. If only 50 televisions per charity are actually won, the charities in that hall could give away over 350 televisions per year. At that potential, the commenter believes many charities would be able to obtain televisions at a good price from an appliance wholesaler. If a charity awards a $500 cash prize, it must take in at least $500 in revenues. But, if a charity awards a television with a retail value of $500, the charity may be able to obtain the television from a wholesales for, say, $250. The charity is $250 ahead relative to a cash prize. On the other hand, the player received $500 in value, as promised and that $500 in value is consistent with the payout structure established by the manufacturer.

Of course, a licensed distributor could obtain the televisions from a wholesaler and then provide them to the charities. The commenter does not object to the distributor being authorized to do so. But, the commenter sees no particular reason why the additional costs represented by the distributor-as-middle-man must, by law, be included in the marketing chain. The commenter believes there is no assurance that the price the distributor charges the charity will not eat up most, or all, of the margin between the wholesale cost of the prize and the retail value to the player. The likelihood of that happening is greatly reduced if the charity can go into the market to make the purchase.

The commenter suggests that the manufacturer produces a game with an established payout structure based on a winning tab that says something like "$500 Merchandise Prize" or $500 Cash or Merchandise." (We have seen such tabs but there may be many ways to do it, including just a generic prize amount accompanied by player education that the prize is a $500 television that day.) Then, it is incumbent on the charity that wants to provide a merchandise prize to supply one that has a retail value for $500. (If it does not, the players will recognize it and will not tolerate it.)

The commenter realizes there are security and integrity issues that must be addressed to allow charities to obtain merchandise from non-distributors, although the commenter believes the potential benefits to the charities far exceed any difficulty of resolving these issues. These issues are inherent in the merchandise prize concept and are not peculiar to allowing charities to get the prize from whoever supplies the best value.

Rather than bog the proposed rulemaking down in consideration of these issues, the commenter makes the following simple suggestion, which the commenter believes would be administratively workable and obtain the benefits for charities that the commenter is seeking. The general rule should be as proposed in the rule. Then, simply authorize the director of the charitable bingo division to allow case-by-case exceptions to the general rule if a charity provides a plan acceptable to the director that addresses the security and integrity issues that are inherent in merchandise prize offerings, such as: How the payout structure established by the manufacturer will be maintained by the charity that desires to award a merchandise prize obtained from a non-distributor.

How the prize fee will be calculated by the charity awarding merchandise prizes obtained from non-distributors.

How the expenses for the merchandise obtained from a non-distributor will be accounted for and how an inventory for the merchandise obtained from a non-distributor will be maintained, such that an audit trail is maintained.

How the charity awarding a merchandise prize obtained from a non-distributor will ensue the player gets the value promised in the payout structure.

How the charity will ensure that the prize amount of the non-distributor prize does not exceed $750.

Any other issues the director requires to be addressed.

Specifically, the commenter suggests the following amendments and language to address these issues:

(1) Strike the words "provided to a licensed authorized organization by a licensed distributor" from the proposed definition of merchandise.

(2) Establish a new paragraph or subparagraph that reads:

(A)(1) Except as provided by subsection (A)(2) merchandise must be obtained by a licensed authorized organization from a licensed distributor.

(2) The director of charitable bingo operations may authorize a licensed authorized organization to obtain merchandise from a party other than a licensed distributor if the licensed organization requests such authorization and, prior to obtaining merchandise from a non-distributor, submits a plan acceptable to the director that addresses the security and integrity of a game utilizing such merchandise, including:

(i) maintenance of the payout structure established by the manufacturer;

(ii) calculation of prize fees;

(iii) accounting for expenses of related to obtaining the merchandise;

(iv) maintenance of inventories and other records related to such merchandise;

(v) how the prize amount will be established for the merchandise;

(vi) measures for ensuring that the prize amount do not exceed $750; and

(vii) any other issues the director requires be addressed.

Agency response: The Commission disagrees with the commenter's suggestion and believes that the commenter's intent is captured by the changes to subsection (a)(14).

Comment: Several commenters are concerned that there are so many names for games and types of games and types of playing procedures used in the industry nationwide, that it is difficult, if not impossible to capture in words all the possibilities that would be allowed under state statutes. One commenter would like the proposed rule to be construed broadly so that, should there be ambiguities or inadvertent use of trade lingo, when products are offered for approval the division is clearly authorized to approve those products, if they are consistent with the statute and not in direct contradiction to the rule. Such a rule of interpretation would ensure the broadest array of products available for sale in Texas under current statutes, which the commenter believes to be the purpose of this effort. The commenter suggests something like the following be added to the proposed rule: "Subject to specific limitations and procedures provided in this §402.554, it is the intent of the Commission that this rule be liberally construed to achieve the purpose of expanding and promoting opportunities for licensed authorized organizations and bingo players to have access to pull tab products that are authorized by state statutes. In the event of any ambiguity in these rules with respect to a specific product or type of play, the director of the charitable bingo division is authorized and directed to interpret this rule so that such products and types of play are made available, if authorized under state law."

Agency response: Although the Commission agrees with the commenter that the intent of the proposed new rule is to allow for a greater variety of pull-tab games to be played in the State of Texas, the Commission does not agree with the commenter's suggestion because the Commission believes it will create ambiguity and the potential for misinterpretation of the regulatory requirements. This language creates to many opportunities for unintended consequences to occur.

Comment: Another commenter offered the following comment: Background: "Seal cards" are a type of pull-tab game allowed in other states. The whole movement to allow new games started with a presentation about seal cards to the Bingo Advisory Committee.

In a seal card game, when a player opens a pull tab and wins, the player becomes eligible to win again because the player is automatically eligible for prizes or winning numbers posted under "seals" on a board at the front of the bingo hall.

Problem: Although the staff says they will interpret the rules to allow seal cards, the proposed rules do not contain the words "seal cards." One type of game that is clearly allowed might include seal cards, but it is not clear that it does.

Solution: Add seal cards to the "style of play" part of the rule or at least use seal cards as an example of what would be allowed under one the styles of play that are listed.

Agency response: The Commission disagrees with the commenter. "Seals" on flares could take many forms and be utilized by many different types of games. The addition of the term "seal" to the rule is unnecessary. By the very nature of the game, the winning feature is revealed by the removal of a "tab", "seal" or other covering device.

Comment: Another commenter offered the following comment: Background: Under current rules, a charity must maintain a "purchase log" showing information about their pull-tab purchases from distributors. The information on the log is obtained from the distributor when the charity receives the invoice from the distributor.

Problem: The proposed rule does not change the current purchase log requirements. But, since the information is contained on the invoice from a distributor and the charity has to retain the invoices, why must a charity create a new document to "log" these purchases. The invoices form an audit trail that can be used by the Lottery Commission and the charity to track its inventory.

The commenter wants to simplify administrative burdens on charities whenever possible.

Solutions: (1) Replace the words "purchase logs" with the word documentation. As long as the charity retains the distributor's invoices and the invoices have the correct information, there will be an audit trail. (2) Or, add language that allows the distributor to provide the purchase log to the charity, so the charity won't have to do it. The distributor has the information anyway and can produce these logs.

Agency response: The Commission disagrees with the commenter's representation of the required "purchase log" and the statement that all required information is captured from the distributor's invoice. While the purchase log contains some of the information provided by the distributor's invoice, it also contains a means to track when a deal was put into play. This is an important audit control feature for both the organization and the agency. The purchase log serves as a convenient summary of purchase and sales information. The Commission does not believe the requirements with regard to the purchase log or requirements contained in the rule pose an unreasonable administrative burden for licensees. The Commission recognizes that regulatory operations create administrative burdens, especially in an industry that is cash-intensive, like gambling operations. However, to ensure that the Commission meets its regulatory responsibilities, it will impose requirements that may pose an administrative obligations for a licensee. The issue is the balance to be reached between administrative burden for the licensee and the Commission carrying statutory responsibilities in regulating and administering bingo.

Comment: Another commenter offered the following comment: Background: A new provision requires charities to maintain a "perpetual inventory" of all pull tab games and to account for all sold and unsold pull-tabs. As a practical matter, most charities keep an inventory of their merchandise now and everyone selling a retail product should.

Problem: Perpetual means forever. But, other parts of the rule require that records be maintained for only four years.

Solution: strike the word "perpetual" in the inventory rule and make it clear that the inventory records are to be kept for four years, not forever.

Agency response: The Commission disagrees with the commenter that the term "perpetual inventory" be deleted. The term "perpetual inventory" is an accounting term meaning a system of inventory records that continuously disclose the amount of inventory on hand at any point in time. The records will reflect what inventory was started with, what was purchased and what was sold. The term does not indicate that the inventory must be retained perpetually.

Comment: Another commenter offered the following comment: Background: Under current rules, the permission to manufacture each pull-tab game expires after two years. Under the proposed rule, the permission will not expire at all. But, if the manufacturer decides not to continue to manufacture a game for sale in Texas, it must notify the Commission.

Problems: (1) The rule does not make it clear that charities and distributors can continue to sell any pull tabs they have in inventory after the manufacturer notifies the Commission it is going to discontinue making that pull tab for sale in Texas. (2) The rule does not make it clear that the manufacturer has the right to start printing the ticket for sale again in Texas whenever it wants to and the charities want to buy it.

Solutions: (1) Make it clear that charities and distributors can continue to sell any pull-tabs they have in inventory after the manufacturer notifies the Commission it is going to discontinue making that pull tab for sale in Texas. (2) Make it clear that a manufacturer can return to making a discontinued game for sale in Texas at any time, as long as it notifies the Commission first. If the rules or state law have changed in the meantime, the Commission can then inform the manufacturer that the pull-tab in question must comply with the new laws.

Agency response: These comments have been addressed earlier under subsection (b)(7).

Comment: Another commenter indicated she was in support of the proposed new rule because she thinks it will provide more variety of pull-tabs.

Agency response: The Commission agrees.

Comment: Another commenter was in support of the proposed new rule but wanted the administrative burden on the charities reduced.

Agency response: The Commission does not have sufficient information to understand what the administrative burden to which the commenter is referring.

Comment: Another commenter indicated he was in support of the proposed new rule and suggested that the guiding principle agency staff should keep in mind is whether the particular wording in the proposed rule cause sales to increase.

Agency response: The Commission's guiding principle in the development of any new or amended rule is the specific statutory authority granted by the Bingo Enabling Act.

There are no groups or associations indicating opposition to the proposed rule.

The new rule is adopted under Occupations Code, §2001.054 which authorizes the Commission to adopt rules to enforce and administer the Bingo Enabling Act, under Government Code, §467.102 which authorizes the Commission to adopt rules for the enforcement and administration of the laws under the Commission's jurisdiction, and under Occupations Code, §2001.051(b) which grants the Commission broad authority to exercise strict control and close supervision over all bingo conducted in Texas so that bingo is fairly conducted and the proceeds derived from bingo are used for an authorized purpose.

The new rule implements Occupations Code, Chapter 2001.

§402.554.Pull-Tab Bingo.

(a) Definitions. The following words and terms, shall have the following meanings, unless the context clearly indicates otherwise:

(1) Bingo Ball Draw--A pulling of a bingo ball(s) to determine the winner of an event ticket by either the number or color on the ball(s).

(2) Deal--A separate and specific game of pull-tab bingo tickets of the same serial number and form number.

(3) Face--The front of a pull-tab bingo ticket, which displays the artwork of a specific game. The front of the pull-tab bingo ticket includes, but is not limited to, the name of the game, the price of the game and the payout structure of the game.

(4) Flare--A poster or placard that must display:

(A) a form number of a specific pull-tab bingo game;

(B) the name of the pull-tab bingo game;

(D) the cost per pull-tab bingo ticket;

(E) the number of prizes to be awarded and the corresponding prize amounts of the pull-tab bingo game; and,

(F) the name of the manufacturer or trademark.

(5) Form Number--The unique identification number assigned by the manufacturer to a specific pull-tab bingo game. A form number may be numeric, alpha, or a combination of numeric and alpha characters.

(6) High Tier--The two highest paying prize amounts as designated on the face of the pull-tab bingo ticket and on the game's flare.

(7) Last Sale--The purchaser of the last pull-tab bingo ticket(s) sold in a deal with this feature is awarded a prize or a registration for the opportunity to win a prize.

(8) Merchandise--Any non-cash item(s) provided to a licensed authorized organization that is used as a prize.

(9) Wheels--Devices that determine event ticket winner(s) by a spin of a wheel.

(10) Pay-Out--The total sum of all possible prize amounts in a pull-tab bingo game.

(11) Payout Schedule--A printed schedule prepared by the manufacturer that displays:

(A) the name of the pull-tab bingo game;

(B) the form number of the pull-tab bingo game;

(D) the cost per pull-tab bingo ticket;

(E) the number of prizes to be awarded and the corresponding prize amount for each category of the pull-tab bingo game;

(F) the number of winners for each category of prize;

(G) the profit of the pull-tab bingo game;

(H) the percentage of payout or the percentage of profit of the pull-tab bingo game; and,

(I) the payout of the pull-tab bingo game.

(12) Payout Structure--The printed information that appears on the face of a pull-tab bingo ticket. This display shows the winnable prize amounts, the winning patterns required to win a prize, and the number of winners for each category of prize.

(13) Prize--An award of collectible items, merchandise, cash, bonus pull-tabs, and additional pull-tab bingo tickets, individually or in any combination.

(14) Prize Amount--The value of cash and/or the fair market value of merchandise which is awarded as a prize. A collectable item is considered merchandise for determining allowable prize amounts. If a manufacturer or distributor supplies a merchandise prize, the manufacturer or distributor must determine the fair market value of the merchandise prize, otherwise the fair market value of a merchandise prize must be determined by the authorized organization.

(15) Reverse--The back of a pull-tab bingo ticket that has a perforated break-open tab(s) that when opened reveals one or more numbers and/or symbols that appear under the tab(s).

(16) Serial Number--The unique identification number assigned by the manufacturer identifying a specific deal of pull-tab bingo tickets. A serial number may be numeric, alpha, or a combination of numeric and alpha characters.

(17) Symbol--A graphic representation of an object other than a numeric or alpha character.

(b) Approval of pull-tab bingo tickets.

(1) A pull-tab bingo ticket may not be sold in the state of Texas, nor furnished to any person in this state nor used for play in this state until that pull-tab bingo ticket has received approval for use within the state of Texas by the commission. The manufacturer at its own expense must present their pull-tab bingo ticket to the commission for approval.

(2) All pull-tab bingo ticket color artwork with a letter of introduction including style of play must be presented to the commission's Austin, Texas location for review. The manufacturer must submit one complete color positive or hardcopy set of the color artwork for each pull-tab bingo ticket and its accompanying flare. The color artwork may be submitted in an electronic format prescribed by the commission in lieu of the hardcopy submission. The submission must include the payout schedule. The submission must show the face and reverse sides of a pull-tab bingo ticket and must be submitted on an 8 1/2" x 11" size sheet. The color artwork will show the actual size of the ticket and a 200% size of the ticket. The color artwork will clearly identify all winning and non-winning symbols. The color artwork will clearly identify the winnable patterns and combinations.

(3) The color artwork for each individual pull-tab bingo ticket must:

(A) display in no less than 26-point diameter circle, an impression of the commission's seal with the words "Texas Lottery Commission" engraved around the margin and a five-pointed star in the center;

(B) contain the name of the game in a conspicuous location on the face of the pull-tab bingo ticket;

(C) contain the form number assigned by the manufacturer in a conspicuous location on the face of the pull-tab bingo ticket;

(D) contain the manufacturer's name or trademark in a conspicuous location on the face of the pull-tab bingo ticket;

(E) disclose the prize amount and number of winners for each prize amount, the number of individual pull-tab bingo tickets contained in the deal, and the cost per pull-tab bingo ticket in a conspicuous location on the face of the pull-tab bingo ticket;

(F) display the serial number where it will be printed in a conspicuous location on the face of the pull-tab bingo ticket. The color artwork may display the word "sample" or number "000000" in lieu of the serial number;

(G) contain graphic symbols that preserve the integrity of the commission. The commission will not approve any pull-tab bingo ticket that displays images or text that could be interpreted as depicting alcoholic beverages, weapons, profane language, provocative, explicit or derogatory images or text. All images or text are subject to final approval by the commission; and,

(H) be accompanied with the color artwork of the pull-tab bingo tickets reverse side along with a list of all other colors that will be printed with the game.

(4) Upon approval of the color artwork, the manufacturer will be notified by the commission to submit one (1) deal, for testing. The deal must be submitted for testing to the commission at the manufacturers own expense. If necessary, the commission may request that additional deals be submitted for testing.

(5) If the color artwork is approved and the pull-tab bingo deal(s) pass the commission's testing, the manufacturer will be notified of the approval. This approval only extends to the specific pull-tab bingo game and the specific form number cited in the commission's approval letter. If the pull-tab bingo ticket is modified in any way, with the exception of the serial number, it must be resubmitted to the commission for approval.

(6) The commission may require resubmission of an approved pull-tab bingo ticket at any time.

(7) If an approved pull-tab bingo game is discontinued or no longer manufactured for sale in Texas, the manufacturer of this game must provide the commission written notification within ten days of this change. The notification must include the name of the pull-tab bingo game and the form number of the pull-tab bingo ticket. The written notification may be sent to the commission via facsimile, e-mail, delivery services or postal delivery. Notification that a game has been discontinued does not preclude a manufacturer, distributor or authorized organization from continuing to sell any deals produced prior to the date the game was discontinued. A manufacturer may reactivate a discontinued game by submitting a request to the commission with a statement that the artwork for the discontinued game has not changed and by submitting the appropriate number of deals for testing from the next print run from the reactivated game. If the manufacturer does want to reactivate a game and make changes to the artwork then the artwork must be resubmitted for approval.

(1) Upon inspection of a pull-tab bingo ticket by the commission and if it is deemed not to properly preserve the integrity or security of the commission including compliance with the art work requirements of this rule, the commission may disapprove a pull-tab bingo ticket. All pull-tab bingo tickets that are disapproved by the commission may not be displayed or sold in the state of Texas by licensed manufacturers. Disapproval of and prohibition to use, purchase, sell or otherwise distribute such a pull-tab bingo ticket is effective immediately upon notice to the manufacturer by the commission.

(2) If modified by the manufacturer all disapproved pull-tab bingo tickets may be resubmitted to the commission. At any time the manufacturer may withdraw any disapproved pull-tab bingo tickets from further consideration.

(3) The commission may disapprove a pull-tab bingo game at any stage of review, which includes artwork review and security testing, or at any time in the duration of a pull-tab bingo game. The disapproval of a pull-tab bingo ticket is administratively final.

(d) Manufacturing requirements.

(1) Manufacturers of pull-tab bingo tickets must manufacture, assemble, and package each deal in such a manner that none of the winning pull-tab bingo tickets, nor the location, or approximate location of any winning pull-tab bingo ticket can be determined in advance of opening the deal by any means or device. Nor should the winning pull-tab bingo tickets, or the location or approximate location of any winning pull-tab bingo ticket be determined in advance of opening the deal by manufacture, printing, color variations, assembly, packaging markings, or by use of a light. Each manufacturer is subject to inspection by the commission, its authorized representative, or designee.

(2) All winning pull-tab bingo tickets as identified on the payout schedule must be randomly distributed and mixed among all other pull-tab bingo tickets of the same serial number in a deal regardless of the number of packages, boxes, or other containers in which the deal is packaged. The position of any winning pull-tab bingo ticket of the same serial numbers must not demonstrate a pattern within the deal or within a portion of the deal.

(3) Each deal of pull-tab bingo tickets must contain a packing slip inside the deal. This packing slip must substantiate the name of the manufacturer, the serial number for the specific deal, the date the deal was packaged, and the name or other identification of the person who packaged the deal.

(4) Each deal's package, box, or other container shall be sealed at the manufacturer's factory with a seal including a warning to the purchaser that the deal may have been tampered with if the package, box, or other container was received by the purchaser with the seal broken.

(5) Each deal's serial number shall be clearly and legibly placed on the outside of the deal's package, box or other container or be able to be viewed from the outside of the package, box or container.

(6) The flare for the deal shall be located on the outside of each deal's sealed package, box, or other container.

(7) Manufacturers must seal or tape, with tamper resistant seal or tape, every entry point into a package, box or container of pull-tab bingo tickets prior to shipment. The seal or tape must be of such construction as to guarantee that should the container be opened or tampered with, such tampering or opening would be easily discernible.

(8) All high tier winning instant pull-tab bingo tickets must utilize a secondary form of winner verification.

(9) Each individual pull-tab bingo ticket must be constructed so that, until opened by a player, it is substantially impossible, in the opinion of the commission, to determine its concealed letter(s), number(s) or symbol(s).

(10) No manufacturer may sell or otherwise provide to a distributor and no distributor may sell or otherwise provide to a licensed authorized organization of this state or for use in this state any pull-tab bingo game that does not contain a minimum prize payout of 65% of total receipts if completely sold out.

(11) A manufacturer in selling or providing pull-tab bingo tickets to a distributor shall seal or shrink-wrap each deal completely in a clear wrapping material.

(12) Pull-tab bingo tickets must:

(A) be constructed of cardboard and glued or otherwise securely sealed along all four edges of the pull-tab bingo ticket and between the individual perforated break-open tab(s) on the ticket. The glue must be of sufficient strength and type so as to prevent the separation of the face from the reverse sides of a pull-tab bingo ticket;

(B) have letters, numbers or symbols that are concealed behind perforated window tab(s) ; and allow such letters, numbers or symbols to be revealed only after the player has physically removed the perforated window tab(s) ;

(C) prevent the determination of a winning or losing pull-tab bingo ticket by any means other than the physical removal of the perforated window tab(s) by the player; and,

(D) have the commission's seal placed on all pull-tab bingo tickets by only a licensed manufacturer.

(13) Wheels must be submitted to the commission for approval. As a part of the approval process, the following requirements must be demonstrated to the satisfaction of the commission:

(A) wheels must be able to spin at least four times with reasonable effort;

(B) wheels must only contain the same number or symbols as represented on the event ticket; and,

(C) locking mechanisms must be installed on wheel(s) to prevent play outside the licensed authorized organization's licensed time(s).

(e) Sales and redemption.

(1) All winning pull-tab bingo tickets must be presented for payment during the licensed authorized organization's licensed times at which the pull-tab bingo ticket is purchased. Immediately upon payment a licensed authorized organization must punch a hole with a standard hole punch through or otherwise mark or deface each winning pull-tab bingo ticket of $5.00 or more.

(2) A licensed authorized organization may sell or redeem winning pull-tab bingo tickets on the premises specified in its bingo license only:

(A) during the licensed authorized organization's licensed times; or

(B) during a required intermission between the bingo occasions of two licensed authorized organizations.

(3) Licensed authorized organizations may not display or sell any pull-tab bingo ticket which has in any manner been marked, defaced, tampered with, or which otherwise may deceive the public or affect a person's chances of winning.

(4) A licensed authorized organization may not withdraw a deal of pull-tab bingo tickets from play until the entire deal is completely sold out or all winning pull-tab bingo tickets of $5.00 prize winnings or more have been either cashed, or redeemed, or the bingo occasion ends.

(5) A licensed authorized organization may not commingle different serial numbers of the same form number of pull-tab bingo tickets.

(6) A licensed authorized organization may bundle pull-tab bingo tickets of different form numbers and may sell these bundled pull-tab bingo tickets during their licensed times.

(7) The licensed authorized organization's gross receipts from the sale of pull-tab bingo tickets must be included in the reported total gross receipts for the organization. Each deal of pull-tab bingo tickets must be accounted for in sales, prizes or unsold cards.

(f) Inspection. The commission, its authorized representative or designee may examine and inspect any individual pull-tab bingo ticket or deal of pull-tab bingo tickets and may pull all remaining pull-tab bingo tickets in an unsold deal.

(g) Records.

(1) Any licensed authorized organization selling pull-tab bingo tickets must maintain a purchase log showing:

(A) the date of the purchase, the form number and corresponding serial number of the purchased pull-tab bingo tickets; and,

(B) the name, address, and taxpayer number of the distributor from whom the pull-tab bingo tickets were purchased.

(2) Licensed authorized organizations must show the sale of pull-tab bingo tickets, prizes that were paid and the serial number of the pull-tab bingo tickets on the daily cash report. The aggregate total sales for the licensed authorized organization must be recorded on the cash register.

(3) Licensed authorized organizations must maintain a perpetual inventory of all pull-tab bingo games. They must account for all sold and unsold pull-tab bingo tickets and pull-tab bingo tickets designated for destruction. The licensed authorized organization will be responsible for the gross receipts, prizes and prize fee associated with the unaccounted for pull-tab bingo tickets.

(4) As long as a specific pull-tab bingo game serial number is in play, all records, reports, receipts and redeemed winning pull-tab bingo tickets of $5.00 or more relating to this specific pull-tab bingo game serial number must be retained on the licensed premises for examination by the commission.

(5) If a deal is removed from play and marked for destruction then all redeemed winning and unsold pull-tab bingo tickets of the deal must be retained by the licensed authorized organization for a period of four years from the date the deal is taken out of play or until the destruction of the deal is witnessed by the commission, its authorized representative or designee.

(6) Manufacturers and distributors must provide the following information on each invoice and other document used in connection with a sale of pull-tab bingo tickets:

(A) date of sale;

(B) quantity sold;

(D) serial number of each pull-tab bingo game's deal;

(E) name and address of the purchaser; and,

(F) Texas taxpayer number of the purchaser.

(7) All licensed organizations must retain these records for a period of four years.

(h) Style of Play. The following pull-tab bingo tickets are authorized by this rule. A last sale feature can be utilized on any pull-tab bingo ticket.

(1) Sign-up Board. A form of pull-tab bingo that is played with a sign-up board. Sign-up board tickets that contain a winning numeric, alpha or symbol instantly win the stated prize or qualify to advance to the sign-up board. The sign-up board that serves as the game flare is where identified winning sign-up board ticket holders may register for the opportunity to win the prize indicated on the sign-up board.

(2) Sign-up Board Ticket. A sign up board ticket is a form of pull-tab bingo played with a sign-up board. A single window or multiple windows sign-up board ticket reveals a winning (or losing) numeric, alpha or symbol that corresponds with the sign-up board.

(3) Tip Board. A form of pull-tab game where perforated tickets attached to a placard that have a predetermined winner under a seal.

(4) Coin Board. A placard that contains prizes consisting of coin(s). Coin boards can have a sign-up board as part of its placard.

(5) Coin Board Ticket. A form of pull-tab bingo that when opened reveals a winning number or symbol that corresponds with the coin board.

(6) Event Ticket. Pull-tab bingo tickets used as event tickets must contain more than two (2) instant winners. Event ticket winner(s) are determined by some subsequent action such as a drawing of ball(s), spinning wheel, opening of a seal on a flare(s) or any other method approved by the commission so long as that method has designated numbers, letters, or symbols that conform to the randomly selected numbers or symbols.

(7) Instant Ticket. A form of pull-tab bingo that have pre-determined winners and losers and have immediate recognition of the winners and losers.

(8) Multiple Part Event or Multiple Part Instant Ticket. An event ticket that is broken apart and sold in sections by a licensed authorized organization. Each section of the ticket consists of a separate deal with its own corresponding payout structure, serial number, and winner verification.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on June 11, 2002.

TRD-200203669

Kimberly L. Kiplin

General Counsel

Texas Lottery Commission

Effective date: July 1, 2002

Proposal publication date: May 10, 2002

For further information, please call: (512) 344-5113