Part 9.
TEXAS LOTTERY COMMISSION
Chapter 402.
BINGO REGULATION AND TAX
16 TAC §402.535
The Texas Lottery Commission adopts new 16 TAC §402.535,
relating to debit card transactions without changes to the proposed text as
published in the April 23, 2004, issue of the
Texas
Register
(29 TexReg 3892).
The purpose of the new section is to increase understanding and better
recordkeeping among licensees who accept debit card transaction in connection
with the conduct of bingo. Specifically, the new section defines a debit card
transaction, and identifies the records relating to each debit card transaction
which must be maintained by a licensee or Unit in order to substantiate the
contents of each quarterly report and to ensure that funds from debit card
transactions are deposited into the bingo bank account no later than 72 hours
after the transaction.
No comments were received during the established comment period regarding
adoption of the new section.
The new section 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, 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,
under Occupations Code, §2001.458(a)(11) which identifies debit card
transaction fees as possible items of expense paid or incurred in connection
with the conduct of bingo, and under Occupations Code, §2001.451(b-1)
which allows funds derived from the conduct of bingo that are paid through
a debit card transaction to be deposited in the bingo fund not later than
72 hours after the bingo occasion on which the receipts were obtained.
The new section 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 May 27, 2004.
TRD-200403588
Kimberly L. Kiplin
General Counsel
Texas Lottery Commission
Effective date: June 16, 2004
Proposal publication date: April 23, 2004
For further information, please call: (512) 344-5113
16 TAC §402.567
The Texas Lottery Commission adopts amendments to 16 TAC §402.567,
relating to Bingo Advisory Committee without changes to the proposed text
as published in the April 16, 2004, issue of the
Texas Register
(29 TexReg 3734).
The amendment changes the date the Bingo Advisory Committee will automatically
abolish and cease to exist unless the Commission affirmatively votes to continue
the Bingo Advisory Committee from March 6, 2004 to August 31, 2005. At the
March 5, 2004 Commission meeting, the Commission voted to continue the Bingo
Advisory Commission and to propose an abolishment date of August 31, 2005.
The purpose of the amendment is to continue the Bingo Advisory Committee so
that the Committee can continue to advise the Commission as provided for in
this section.
No comments were received regarding adoption of the amendments.
The amendments are adopted under Occupations Code, §2001.054
which authorizes the Commission to adopt rules to enforce and administer the
Bingo Enabling Act, 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 and under Occupations Code, §2001.057
which authorizes the Commission to adopt rules governing the operation of
the Bingo Advisory Committee.
The amendments implement 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 May 27, 2004.
TRD-200403589
Kimberly L. Kiplin
General Counsel
Texas Lottery Commission
Effective date: June 16, 2004
Proposal publication date: April 16, 2004
For further information, please call: (512) 344-5113
16 TAC §402.598
The Texas Lottery Commission adopts new 16 TAC §402.598,
relating to the charitable use of proceeds with changes to the proposed text
as published in the March 19, 2004, issue of the
Texas Register
(29 TexReg 2838). The changes are made in response to
comments received. Specifically, subsection (e)(3) is changed from "does not
further the organization's cause deed or activity consistent with the federal
tax exempt application or written purpose provided with their application"
to "does not further the organization's cause deed or activity consistent
with the federal tax exempt application or other written purposes furnished
to the commission that are consistent with the organization's tax exemption."
This change does not create a different rule, affect individuals who would
not have been impacted by the section as proposed, or impose more stringent
requirements than the proposed section.
During the 78th Legislative Session, the Texas Legislature enacted House
Bill 2519, which amended Texas Occupations Code, §2001.454, which describes
what constitutes the use of net proceeds for charitable purposes for licensed
authorized organizations. The purpose of new §402.598 is to provide uniform
guidance to licensed authorized organizations regarding the charitable use
of proceeds. Specifically, the new section identifies records relating to
an organization's charitable purpose which must be maintained by each organization,
the information related to an organization's charitable purpose which must
be submitted when an organization applies for a license to conduct bingo,
and the guidelines used by the Commission to determine if a distribution is
charitable, as described by Occupations Code, §2001.454.
Written comments were received regarding adoption of the new section. The
following commenter provided comment: Stephen Fenoglio, who in his comments
stated that he represented over 950 charities and businesspersons. The following
is a summary of the comments received during the comment period: The commenter
suggested that the commission change subsection (e)(3) to reflect the reality
that some of the licensed authorized organizations, especially those organizations
which have been in existence for over thirty years, may have trouble obtaining
copies of the original application for exempt status submitted to the Internal
Revenue Service (IRS), or the return document from the IRS granting the organization
its exempt status. Thus, the rule should be changed to allow these organizations
to show proof of a charitable distribution by substantiating that the distribution
was consistent with the information contained in the documents provided to
the commission which indicate the charitable purpose of the organization.
Agency response: The Commission agrees with the comment and has revised
the rule language accordingly.
Interested Parties opposed to the section: The Commission did not receive
comment expressing opposition to adoption of the section.
Interested Parties in favor of the section: Stephen Fenoglio and the over
950 charities that he represents expressed support for the adoption of the
section with the recommended changes to subsection (e)(3).
The new section 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, 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,
and under Occupations Code, §2001.454 which provides the standard by
which an organization's use of net proceeds from the conduct of bingo may
be considered dedicated to the charitable purpose of the organization.
The new section implements Occupations Code, Chapter 2001.
§402.598.Charitable Use of Proceeds.
(a)
An organization must maintain and make available to a representative
of the commission or designee:
(1)
a complete copy of the application for exemption, either
I.R.S. Form 1023 for 501(c)(3) organizations or I.R.S. Form 1024 for other
non-profits, which provides a full description of the purposes and the activities
of the organization in relation to the exempt status filed with the Internal
Revenue Service;
(2)
a letter of good standing from the parent organization,
if applicable, copy of the organization's Articles of Incorporation, Articles
of Association, Trust Indenture, Constitution; or
(3)
other enabling document and any amendments and any adopted
bylaws which provide in writing the specific cause, deed or activity that
is consistent with the organization's purposes and objectives for which bingo
net proceeds will be used.
(b)
Organizations Licensed After May 1, 2004 must furnish with
their application to conduct bingo:
(1)
a copy of the application for exemption, I.R.S. Form 1023
for 501(c)(3) or I.R.S. Form 1024 for non-profits;
(2)
a conformed copy of the organization's Articles of Incorporation,
Articles of Association, Trust Indenture, Constitution; or
(3)
other enabling documents and any amendments and any adopted
bylaws and provide in writing the specific cause, deed or activity that is
consistent with the organization's purposes and objectives for which bingo
net proceeds will be used.
(c)
Nothing in this rule precludes the commission from requesting
supplemental information in order to substantiate compliance with Occupations
Code, Chapter 2001.
(d)
Record Keeping:
(1)
All distributions for charitable purposes must be made
from the bingo checking account. A distribution made from the bingo checking
account into another account maintained by the organization must be substantiated
with documentation and used for a cause, deed, or activity dedicated to the
charitable purposes of the organization consistent with the 26 U.S.C. Section
501 tax exemption of the organization or the purposes or objective for which
the organization qualifies as an authorized organization
(2)
A licensed authorized organization must submit quarterly,
on a form prescribed by the commission, a list of the charitable distributions
made by the organization during the quarter.
(3)
All records to substantiate the use of net proceeds must
be maintained for a period of four years.
(4)
Records required by the commission as supporting documentation
of use of net proceeds made by the licensed authorized organization may include
one or more of the following: annual reports; treasurers reports; historian
records; balance sheets; accountants work papers; time cards; meeting minutes;
committee minutes; canceled checks; letters of acknowledgment; newspaper articles;
publications; invoices; receipts; correspondence file; reports to governing
parent organizations; flyers, pamphlets, brochures; advertisement; log, schedule
or calendar; licensed authorized organizations monthly bulletins; criteria
for soliciting applicants awarding scholarships; IRS Form 990; IRS Form 940
and 941; and IRS examination reports.
(e)
A use of net proceeds, which would not be considered as
a cause, deed, or activity dedicated to the charitable purposes of the organization
and not consistent with the 26 U.S.C. Section 501 tax exemption of the organization
or the purposes or objective for which the organization qualifies as an authorized
organization, are any use of proceeds which:
(1)
inures to the benefit of any private shareholder, individual,
officers, governing body or member other than as reasonable compensation for
services rendered;
(2)
has no documentation to substantiate the use of net proceeds;
or
(3)
does not further the organization's cause, deed or activity
consistent with the federal tax exempt application or other written purposes
furnished to the commission that are consistent with the organization's tax
exemption.
(f)
Reimbursement or direct payment for member or employee
travel expenses. Reimbursement or direct payment for member or employee travel
expenses will only be considered a cause, deed, or activity dedicated to the
charitable purposes and consistent with the 26 U.S.C. Section 501 tax exemption
of the organization or the purposes or objective for which the organization
qualifies as an authorized organization if the following records are provided
to the commission upon request:
(1)
the itinerary of the seminar, convention, or retreat showing
that the purpose of the seminar, convention, or retreat was primarily to discuss
the charitable functions and purposes consistent with the 26 U.S.C. Section
501 tax exemption of the organization or the purposes or objective for which
the organization qualifies as an authorized organization; and
(2)
the original receipts and cancelled checks, or true and
correct copies of the same, showing the date and amount of the contribution
for actual out-of-pocket reasonable and necessary expenses such as hotel,
airline tickets, meals, etc. and the corresponding request for payment or
reimbursement maintained by the organization.
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 May 27, 2004.
TRD-200403587
Kimberly L. Kiplin
General Counsel
Texas Lottery Commission
Effective date: June 16, 2004
Proposal publication date: March 19, 2004
For further information, please call: (512) 344-5113