TITLE 16.ECONOMIC REGULATION

Subchapter A. ORGANIZATION OF THE COMMISSION

The Texas Racing Commission proposes a new §303.16, relating to the use of historically underutilized businesses in the purchasing of goods and services by the Commission with appropriated money. The Commission is required to adopt the Texas Building and Procurement Commission's rules as its own under Texas Civil Statutes, Government Code, §2161.003.

Paula C. Flowerday, Executive Secretary for the Texas Racing Commission, has determined that for the first five-year period the new rule is in effect there will be no fiscal implications for state or local government as a result of enforcing the new rule.

Ms. Flowerday has also determined that for each of the first five years the new rule is in effect the anticipated public benefit will be the potential increase in the use of historically underutilized businesses. There may be positive fiscal implications for small or micro-businesses; the exact impact cannot be determined because it will depend on the value of the purchases the Commission makes with historically underutilized businesses. In FY 2002, 24% of the Commission's total purchasing dollars were spent with historically underutilized businesses. There is no anticipated economic cost to an individual required to comply with the new rule as proposed. The new rule will have no effect on the state's agricultural, horse breeding, horse training, greyhound training, and greyhound breeding industries.

Comments on the proposal may be submitted on or before August 1, 2003, to Paula C. Flowerday, Executive Secretary for the Texas Racing Commission, P.O. Box 12080, Austin, Texas 78711-2080.

The new rule is proposed under the Texas Civil Statutes, Article 179e, §3.02 which authorizes the Commission to make rules relating exclusively to horse and greyhound racing.

The new rule implements Texas Civil Statutes, Article 179e.

§303.16.Historically Underutilized Businesses.

Pursuant to Government Code, §2161.003, the Commission adopts by reference the provisions of 1 TAC §§111.11 et seq.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 2, 2003.

TRD-200303341

Nicole Galwardi

General Counsel

Texas Racing Commission

Earliest possible date of adoption: July 13, 2003

For further information, please call: (512) 490-4009

Subchapter D. TEXAS BRED INCENTIVE PROGRAMS

2. PROGRAM FOR HORSES

16 TAC §303.93

The Texas Racing Commission proposes an amendment to §303.93, relating to the payout of Accredited Texas Bred awards by the Texas Quarter Horse Association. The amendment will allow the Texas Quarter Horse Association to consolidate the Accredited Texas Bred awards into one payout upon completion of the race meet, for race meets less than 18 days.

Paula C. Flowerday, Executive Secretary for the Texas Racing Commission, has determined that for the first five-year period the amendment is in effect there will be no fiscal implications for state or local government as a result of enforcing the amendment.

Ms. Flowerday has also determined that for each of the first five years the amendment is in effect the anticipated public benefit will be the increased efficiency of the payout of the Accredited Texas Bred awards by the Texas Quarter Horse Association. There are no fiscal implications for small or micro-businesses. There is no anticipated economic cost to an individual required to comply with the amendment as proposed. The proposal will have a positive effect on the state's horse breeding industries, by increasing the efficiency of the payout of the Accredited Texas Bred awards. The proposal will have no effect on the state's agricultural, horse training, greyhound training, and greyhound breeding industries.

Comments on the proposal may be submitted on or before August 1, 2003, to Paula C. Flowerday, Executive Secretary for the Texas Racing Commission, P.O. Box 12080, Austin, Texas 78711-2080.

The amendment is proposed under the Texas Civil Statutes, Article 179e, §3.02 which authorizes the Commission to make rules relating exclusively to horse and greyhound racing.

The proposed amendment implements Texas Civil Statutes, Article 179e.

§303.93.Quarter Horse Rules.

(a) - (b) (No change.)

(1) - (2) (No change.)

(3) Procedures for Payment of Awards. Any accredited Texas-bred quarter horse that finishes first, second, or third in a pari-mutuel horse race in Texas (except stakes race restricted to Texas-breds) shall be entitled to receive an incentive award, as herein set forth.

(A) - (C) (No change.)

(D) TQHA shall maintain records of all ATB racing stock that earn awards. At the completion of a race period not to exceed four racing weeks, TQHA shall begin the process to generate awards checks for the breeders and the stallion owners corresponding to those ATB racing stock by apportionment according to the percentages expressed in subparagraph (C) of this paragraph [ ~~subsection~~ ]. The awards for each race shall be divided 50% to first place, 30% to second place, and 20% to third place. Upon receipt of the ATB funds from the commission for the race period, TQHA shall disburse the awards by U.S. mail. For race meets less than 18 days in duration the TQHA reserves the right to consolidate ATB awards into one payout upon completion of the race meet.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 2, 2003.

TRD-200303339

Nicole Galwardi

General Counsel

Texas Racing Commission

Earliest possible date of adoption: July 13, 2003

For further information, please call: (512) 490-4009

Chapter 315. OFFICIALS AND RULES FOR GREYHOUND RACING

Subchapter A. OFFICIALS

2. DUTIES

16 TAC §315.31

The Texas Racing Commission proposes an amendment to §315.31, relating to the duties of the Racing Judges at weigh-in for greyhounds for each performance. The amendment modifies the requirement regarding the number of the Racing Judges who are required to be present on the association grounds not later than the greyhound weigh-in time for each performance, reducing the requirement from two judges to one judge.

Ms. Flowerday has also determined that for each of the first five years the amendment is in effect the anticipated public benefit will be increase in cost saving to the state by facilitating scheduling changes of the racing judges, without compromising the integrity of pari-mutuel greyhound racing. There are no fiscal implications for small or micro-businesses. There is no anticipated economic cost to an individual required to comply with the amendment as proposed. The amendment will have no effect on the state's agricultural, horse breeding, horse training, greyhound training, and greyhound breeding industries.

Comments on the proposal may be submitted on or before August 1, 2003, to Paula C. Flowerday, Executive Secretary for the Texas Racing Commission, P.O. Box 12080, Austin, Texas 78711-2080.

The amendment is proposed under the Texas Civil Statutes, Article 179e, §3.02 which authorizes the Commission to make rules relating exclusively to horse and greyhound racing.

The proposed amendment implements Texas Civil Statutes, Article 179e.

§315.31.Racing Judges.

(a) - (e) (No change.)

(f) At least one racing judge shall observe the weigh-in for each performance. [ ~~A majority of the racing judges shall be present on association grounds not later than the weigh-in time for each performance.~~ ]

(g) - (i) (No change.)

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 2, 2003.

TRD-200303342

Nicole Galwardi

General Counsel

Texas Racing Commission

Earliest possible date of adoption: July 13, 2003

For further information, please call: (512) 490-4009

Part 9. TEXAS LOTTERY COMMISSION

Chapter 402. BINGO REGULATION AND TAX

16 TAC §402.544

The Texas Lottery Commission proposes new section 16 TAC §402.544 relating to license fees. The new section sets out information regarding license fees. Specifically, the new section sets out the requirements for a license fee that must be submitted by an authorized organization that files an application for an original license to conduct charitable bingo or a person that files an application to lease bingo premises and identifies the amount of license fee required to be submitted during the first six months of the license term or upon license renewal. The new section also sets out the requirements for a license fee when a license is in administrative hold, identifies how an annual license fee is recalculated at renewal, addresses an organization’s responsibilities when a license no longer exists, the amount of fee to be submitted if there is a change in an organization’s reported gross receipts or gross rental income, how an overpayment of a fee may be treated by the commission, under what circumstances a refund of payments may occur, how a transfer of commercial license to lease bingo premises affects the license fee, and clarifies that an organization conducting bingo pursuant to a temporary authorization must comply with the same requirements.

Lee Deviney, Financial Administration Director, has determined for each year of the first five years the section is in effect there will not be additional fiscal implications for state or local government as a result of enforcing or administering the rule. There is no anticipated adverse impact on small businesses, micro businesses or local or state employment as a result of implementing the section. The Commission does not anticipate any additional cost to the state or local government as a result of enforcing or administering the rule since the rule sets out current license fee requirements and does not impose new or additional requirements on a person required to comply with the rule.

William L. Atkins, Director, Charitable Bingo Operations Division, has determined that each of the first five years the section as proposed is in effect, the public benefit anticipated as a result of the proposed new section is to clarify the requirements for license fees so that applicants and licensees will know what amount of license fee is owed, under what circumstances additional fee may be required to be paid, the effect of a license being in an administrative hold on a license fee, and under what circumstances a license fee may be refunded.

Written comments on the proposed new rule may be submitted to Kimberly L. Kiplin, General Counsel, Texas Lottery Commission, P. O. Box 16630, Austin, Texas 78761-6630. Comments must be received within 30 days after publication in the Texas Register to be considered.

The proposed new rule is proposed under Occupations Code, Section 2001.054 which authorizes the Commission to adopt rules to enforce and administer the Bingo Enabling Act, under Government Code, Section 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, Section 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 is also proposed under Occupations Code, Sections 2001.104 and 2001.158 which authorizes the commission to adopt rules to provide for the payment of any additional fee amount determined to be due under either of these statutes and credit to be given for any excess fee amount determined to have been paid.

The new rule implements Occupations Code, Chapter 2001.

§402.544.License Fees.

(a) Original License Application.

(1) License to Conduct Charitable Bingo.

(A) An initial license fee for an original license to conduct charitable bingo or an original license to lease bingo premises submitted by an authorized organization that does not have a license issued under Occupations Code, Chapter 2001, must be paid from the organization’s general fund bank account.

(B) An applicant may be required to submit additional license fees if the estimated gross receipts used to calculate the license fee are not reasonable when compared to gross receipts of other organizations with the same number of occasions conducting bingo at the same bingo premises. If no such organizations exist, the division may use gross receipts amounts from organizations with the same number of occasions conducting bingo at similarly situated bingo premises. These amounts are used to establish the gross receipts amount upon which the applicant’s license fee is based and must be submitted.

(2) Commercial License to Lease Bingo Premises.

(A) License fees for an original license to lease bingo premises submitted by an authorized organization licensed to conduct bingo must be paid from the organization’s bingo bank account.

(B) An applicant may be required to submit additional license fees if the estimated gross rental income used to calculate the license fee is not reasonable when compared to the gross rental income at similarly situated bingo premises. These comparative amounts are used to establish the gross rental income amount upon which the applicant’s license fee is based and must be submitted.

(3) Understating the anticipated gross receipts or rental income from a licensed activity for any purpose by an applicant or licensed entity may be grounds for administrative disciplinary action against the licensee.

(b) Changes Within Six Months of the License Term.

(1) Within the first six months of issuance of an organization’s original license, the organization must complete the Worksheet for Calculating License Fee and Bond Amount for a Conductor Amendment (Schedule F) before it may amend its license to increase the number of occasions. The organization must submit additional license fee in an amount equal to the amount of license fee reflected in the Worksheet for Calculating License Fee and Bond Amount for a Conductor Amendment.

(2) An organization shall re-estimate its annual gross rental income and submit any balance due in license fee amount if there is an increase within six months of the issuance of the original lessor license in:

(A) the number of organizations conducting bingo at a licensed location; and

(B) the number of bingo occasions conducted at the licensed location.

(1) The amount of license fee to be paid upon renewal of a license to conduct bingo or license to lease bingo premises is the recalculated license fee amount calculated for the preceding year.

(2) If the recalculation of the license fee amount for the previous year reflects an underpayment of the license fee amount for that year, the incremental difference must be submitted by the organization before the license may be renewed.

(3) Upon written request by an organization to renew its license to conduct bingo or license to lease bingo premises that is in administrative hold, the organization may submit a renewal fee of $100 in lieu of the recalculated fee amount from the preceding year.

(4) The commission may require an amount of license fee in addition to the recalculated fee at renewal if there is a change in:

(A) playing location;

(B) rental amount per occasion; or,

(5) If an organization requests its license be placed in administrative hold upon the renewal of the license and submits an estimated Class A ($100 license fee), the organization shall submit additional license fee when it files an application to amend a license to conduct charitable bingo if the organization amends its license to begin conducting bingo within the first six months of the license term. The additional license fee amount to be submitted is the license fee amount reflected on the Worksheet for Calculating License Fee and Bond Amount for a Conductor Amendment.

(6) If an organization requests its license be placed in administrative hold upon the renewal of its lessor license and submits an estimated Class A ($100 license fee), the organization shall submit an additional license fee when it files the application to amend a commercial license to lease bingo premises if the organization amends its license to begin leasing bingo premises within the first six months of the license term. The additional license fee amount to be submitted is the license fee amount is the estimated annual gross rentals from licensed organizations conducting bingo at the licensed location less the license fee amount paid when the organization submitted its renewal application.

(d) Annual License Fee Recalculation.

(1) For the purpose of determining the license fee recalculation for a license to conduct bingo or license to lease bingo premises, the annual gross receipts or gross rental income, as applicable, shall be based on the four consecutive quarterly returns due immediately prior to the license expiration date.

(2) If a quarterly return is due less than 50 days prior to a license expiration, the gross receipts or gross rental income reported on that return will not be available to be used to calculate the annual gross receipts or gross rental income. Instead, the gross receipts or gross rental income reported on the four immediately preceding quarterly returns, as applicable, will be used to recalculate the organization’s license fee.

(3) If an organization fails to file a report for one or more quarter(s) of the license period, or if there are not four quarters available for any other reason, such as, the original conductor is licensed less than a full year, the commission shall estimate the quarterly gross receipts or gross rental income for the missing quarter(s) to recalculate the organization’s license fee. The estimated gross receipts or gross rental income per quarter is determined by adding the gross receipts or gross rental income, as applicable, reported on the returns filed in the license period and dividing this number by the number of returns filed. The resulting number would then be multiplied by four to calculate the organization's license fee.

(4) License no longer exists.

(A) Notwithstanding the fact that an organization conducted bingo under a license that ceased to exist for whatever reason, the organization must submit the recalculated license fee for the period that the organization conducted bingo and collected gross receipts.

(B) Notwithstanding the fact that an organization which leased bingo premises under a license that ceased to exist for whatever reason, the organization must submit the recalculated license fee for the period that the organization leased the premises and collected gross rental income.

(C) If an organization ceases to be licensed for whatever reason, all gross receipts or gross rental income collected (from the period after the last quarterly return used to recalculate the license fee for the prior year) is used to recalculate the final license fee due. If the organization fails to file a return for any required period(s), an estimated return will be used. The organization shall submit any balance due after license fee recalculation.

(5) The commission may recalculate license fees for up to four consecutive immediately preceding license periods if a change in an organization’s reported gross receipts or gross rental income occurs as a result of an audit, or if the original recalculation was determined by using estimated gross receipts or gross rental income.

(6) If there is a change in an organization’s reported gross receipts or gross rental income, the organization may submit a written request to the division to recalculate its license fees for up to four immediately preceding license periods.

(e) Overpayment of License Fee.

(1) An overpayment of an annual license fee based on the previous year's recalculation is a credit and shall be applied to the license renewal license fee for the next license period.

(2) An organization may submit a written request to have the overpayment of an annual license fee based on the previous year's recalculation applied to:

(A) outstanding liabilities;

(B) annual license fee for another license issued to the organization under Occupations Code, Chapter 2001;

(D) amendment license fee.

(3) An organization may submit an excess license fee payment to be applied to fees in connection with future license applications. At the same time as the submission of the excess license fee, the organization must designate in writing the license application type(s) to which the excess license fee payment is to be applied.

(f) Refund of Payments.

(1) Upon written request for a refund to the division by the organization, an overpayment of annual license fee based on the previous year's recalculation, temporary license fees, and amendment license fees may be refunded to an organization that ceases to be licensed.

(2) Upon written request for a refund to the division, a license fee submitted with an application for a license that is withdrawn before the license is issued may be refunded to an organization which does not have an annual license.

(3) Upon written request for a refund to the division, only a license fee submitted with an application for an annual license that is withdrawn before the license is issued may be refunded to an organization which has another annual license.

(4) Upon written request for a refund to the division, a temporary license fee for a licensed temporary occasion in which bingo was not conducted may be refunded to an organization that does not have an annual license.

(5) A request for a refund of license fee must be written. If any outstanding liabilities exist, the license fee payment will be applied to the outstanding liability. Any balance from the license fee payment, after liabilities are paid, shall be refunded to the organization provided no other outstanding liabilities under Occupations Code, Chapter 2001, to the State exist. A refund will not be issued until all liabilities to the State under Occupations Code, Chapter 2001, have been paid and all quarterly reports have been filed and processed by the commission.

(6) If an application for a license is denied, the director may refund the application fee less the cost incurred by the division to process the application.

(g) Transfer of Commercial License to Lease Bingo Premises.

(1) All gross rental income collected in connection with a license to lease bingo premises that has been transferred during the term of the license shall be used to recalculate the license fee.

(2) A license fee recalculation credit in connection with a license to lease bingo premises that was transferred during the term of the license shall be credited to the current license holder at the time of license renewal.

(3) A license fee recalculation balance due for a license to lease bingo premises that was transferred during the term of the license shall be the liability of the current license holder at the time of license renewal.

(h) The license fee in connection with a license to manufacture bingo supplies, distribute bingo supplies, or system service provider is not refundable.

(i) An organization must submit a fee of $10.00 to the commission at the time the licensed organization notifies the commission of a change in the time or date of a game for an annual license to conduct bingo.

(j) Temporary Authorization to Conduct Bingo.

(1) The amount of gross receipts collected in connection with a temporary authorization is used to recalculate the annual license fee.

(2) An organization conducting bingo pursuant to a temporary authorization must comply with the same statutory and administrative rule requirements, annual gross receipts fee schedule, and quarterly return filing requirements as an organization which has an annual license to conduct bingo.

(3) If an organization conducting bingo pursuant to a temporary authorization does not become licensed to conduct bingo, the fee for the temporary authorization will be determined by the fee schedule for a license to conduct bingo set out in Occupations Code, Section 2001.104(a).

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on May 29, 2003.

TRD-200303295

Kimberly L. Kiplin

General Counsel

Texas Lottery Commission

Earliest possible date of adoption: July 13, 2003

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

16 TAC §402.555

(Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Lottery Commission or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.)

The Texas Lottery Commission proposes the repeal of section 16 TAC §402.555, relating to card-minding device. The rule sets out requirements for the manufacture, distribution, and use of card-minding devices at bingo premises. Contemporaneous with the proposal to repeal this section, the Commission is proposing new section 16 TAC §402.555 relating to card-minding systems because the changes are so substantial that it is less confusing to the reader of the rule to propose a new rule.

Lee Deviney, Financial Administration Director, Texas Lottery Commission has determined that for each year of the first five-year period the repeal is in effect there will be fiscal implications for state or local government as a result of enforcing or administering the section but that fiscal impact will be offset by the anticipated fiscal impact of proposing the new §402.555 contemporaneous with proposing this repeal.

Mr. Deviney has also determined that for each year of the first five-year period the repeal is in effect there will be no cost to small businesses. There will be no impact on local employment.

William L. Atkins, Charitable Bingo Operations Director, Texas Lottery Commission has determined that for each year of the first five-year period the repeal is in effect, the public benefit anticipated as a result of enforcing or administering the repeal will be to propose a new section §402.555 that will set out the requirements for the manufacture, distribution, and use of card-minding systems at bingo premises.

Comments on the proposal may be submitted to Kimberly L. Kiplin, General Counsel, Texas Lottery Commission, P.O. Box 16630, Austin, Texas 78761-6630. Comments must be submitted within 30 days from the date the proposal is published in the Texas Register to be considered.

The repeal is proposed 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 proposed repeal implements Occupations Code, Chapter 2001.

§402.555.Card-minding Device.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on May 29, 2003.

TRD-200303297

Kimberly L. Kiplin

General Counsel

Texas Lottery Commission

Earliest possible date of adoption: July 13, 2003

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

16 TAC §402.555

The Texas Lottery Commission proposes new section 16 TAC §402.555 relating to card-minding systems. The new section sets out definitions of words and phrases used in the rule, the process to obtain commission approval for use of a card-minding system and components, the manufacturing requirements of a card-minding system for approval in Texas, distributor requirements, licensed authorized organization requirements, inspections by the commission, records requirements, and restrictions on the use of a card-minding system in Texas. The commission is proposing the new rule rather than proposing to amend the existing rule because the changes are so substantial that it is less confusing to the reader of the rule to propose a new rule.

William L. Atkins, Director, Charitable Bingo Operations Division, has determined that each of the first five years the section as proposed is in effect, the public benefit anticipated as a result of the proposed new section is to clarify and make more efficient the requirements for manufacturers, distributors, and licensed authorized organizations that are involved with card-minding systems to ensure that the fairness and integrity of the games will not be compromised.

The new rule implements Occupations Code, Chapter 2001.

§402.555.Card-Minding Systems.

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

(1) Card-minding system. Any electronic or computerized device and related hardware and software that is interfaced with or connected to equipment used to conduct a game of bingo as defined in Occupations Code, Section 2001.002. A card-minding system consists of the following two parts:

(A) Card-minding device. An electronic or mechanical device, either portable or fixed-base, that is used by a bingo player to mark representations of bingo card faces stored in the device. A portable card-minding device refers to a hand-held, custom-built or customized, single purpose device designed to be used by a player to play bingo. A fixed-base card-minding device refers to a stationary computer on which a manufacturer's proprietary software is used by a player to play bingo. A card-minding device may be designed to be played in conjunction with paper.

(B) Site system. Computer hardware, software, and peripheral equipment, that is located at the bingo premises, is controlled by the licensed authorized organization, and interfaces with, connects with, controls or defines the operational parameters of card-minding devices and must include, but is not limited to, the following components: point of sale station, a caller station verifier, required printers, dial-up modem, proprietary executable software, report generation software and an accounting system and database. All references to and requirements of site systems and card-minding systems throughout this rule shall be applicable to manufacturers of card-minding devices designed to be played with paper, but the function or action required by the rule may be performed in a manner other than electronically.

(2) Model number. A number designated by the manufacturer that indicates the unique structural design of a portable card-minding device or card-minding system.

(3) Software modifications. Alterations to the proprietary software that affects the requirements or restrictions as identified in this rule or Occupations Code, Chapter 2001 while not making substantial changes that affect the previously approved device's proprietary software or hardware platforms.

(4) Peripheral games. Peripheral games are games that are not prohibited by law, including Occupations Code, Section 2001.416 and/or do not allow the accumulation or awarding of credits that can be exchanged for anything of value.

(5) Player tracking software. Computer software, located on the card-minding system, that is used to track characteristics of bingo players, including personal data and purchasing habits of players at a bingo hall.

(6) Secondary component. Additional software or hardware components, provided by the manufacturer, that are part of or are connected to a card-minding system that does not affect the conduct of the game of bingo. Secondary components may include computer screen backgrounds, battery charge up software routines, printers, printer software drivers, and charging racks.

(7) Proprietary software. Custom computer software developed by the manufacturer that is a primary component of the card-minding system and is required for a card-minding device to be used in a game of bingo.

(8) Serial number. The unique identification number assigned by a manufacturer to a specific portable card-minding device or other component of a card-minding system.

(9) Version number. A unique number designated by the manufacturer to signify a specific version of software used on or by the card-minding system.

(10) Terminal number. The unique identification number, if any, assigned by a manufacturer to a specific fixed-base card-minding device.

(11) Account Number. The unique identification number, if any, assigned by a card-minding system to a customer that uses a fixed-base card-minding device to play bingo.

(12) Checksum or Digital Signature. Methods by which data, as in a software application, is expressed in a calculated number which is used to verify the accuracy of the data or a copy of the data.

(b) Approval of Card-Minding System Components.

(1) Proprietary software may not be sold, leased, or otherwise furnished, including demonstrated except as provided by subsection (i)(6) of this section, to any person in this state, for use in the conduct of bingo until a card-minding system containing the identical software has first been presented to the commission by its manufacturer, at the manufacturer's expense, and has been approved by the commission for use within the state.

(2) A portable card-minding device may not be sold, leased, or otherwise furnished, including demonstrated except as provided by subsection (i)(6) of this section, to any person in this state, for use in the conduct of bingo until a portable card-minding device which is identical to the card-minding device intended to be sold, leased, or otherwise furnished has first been presented to the commission by its manufacturer, at the manufacturer's expense, and has been approved by the commission for use within the state.

(3) Secondary components, including hardware components of fixed-base card-minding devices and non-proprietary software, may not be sold, leased, or otherwise furnished, including demonstrated except as provided by subsection (i)(6) of this section, to any person in this state, for use in the conduct of bingo unless approved by the commission for use within the state. However, manufacturers may conduct routine maintenance activities and replace secondary components of a card-minding system without prior commission approval as long as this activity does not affect the operation of any proprietary software or the manner in which a bingo game is played.

(4) The commission shall determine whether all proprietary software and portable card-minding devices required to be tested, as well as other components of card-minding systems, conform with the requirements and restrictions contained in the Occupations Code, Chapter 2001 and charitable bingo administrative rules. The decision by the commission to approve or disapprove any component of a card-minding system is administratively final.

(5) A card-minding system may not allow the play or simulate the play of video poker, keno, blackjack or similar games.

(6) Manufacturers may provide any reports and test results conducted or prepared by an independent, third-party testing laboratory with any submission of a card-minding system or modification to a card-minding system to the commission. The commission may consider the information contained in these reports during the approval process.

(7) A checksum number or digital signature will be obtained from the proprietary software submitted for testing to be used to verify proprietary software compliance at playing locations.

(1) A portable card-minding device that is identical to the portable card-minding device intended to be sold, leased, or otherwise furnished must be presented to the commission in Austin for review and testing by the commission, if the commission determines testing is required. A copy of proprietary software that is identical to the proprietary software intended to be sold, leased, or otherwise furnished must be presented to the commission in Austin for review and testing by the commission, if the commission determines testing is required.

(A) Submissions must include all associated hardware, software, written operating manuals and technical information, to the extent not already in the commission's possession, in order to allow the commission to determine whether the components submitted and the card-minding system that will contain the components complies with the Occupations Code, Chapter 2001 and charitable bingo administrative rules.

(B) Once the manufacturer represents that the card-minding system is ready for testing, no modifications will be allowed to the card-minding system while the testing is in progress. The commission shall either approve or disapprove the submitted card-minding system or component in writing within 45 days unless the commission finds that there is good cause to extend this period for another 45 days.

(C) The manufacturer will be assessed a fee in an amount that is at least sufficient to cover the costs incurred by the division for testing each original submission, resubmission of a disapproved card-minding system or component, and submission of modifications to a previously approved card-minding system. Failure to pay this fee may result in administrative action being taken against the manufacturer.

(i) An original submission shall include, but is not limited to, an entirely new card-minding system, an entirely new component of a card-minding system, including changes to the proprietary software, the point of sale, database, server and card-minding devices that create a version number change.

(ii) Software modifications that require testing and a subsequent fee are alterations to the proprietary software that affects the requirements or restrictions as identified in this rule or Occupations Code, Chapter 2001 while not making substantial changes to previously approved proprietary software or hardware platforms.

(iii) Changes of or to a secondary component, including but not limited to printers, monitors, or batteries, that do not affect the play of the game or the databases and do not affect the requirements or restrictions as identified in this rule are not considered modifications that require testing, but they do require approval by the commission prior to use. The commission retains the right to determine if a change of this type is subject to testing.

(2) The commission must be informed via a written communication of all secondary components of a card-minding system that a manufacturer intends to be sold, leased, or otherwise furnished for use in the conduct of bingo prior to such use.

(3) If granted, approval extends only to the specific card-minding system or component approved. Any modification must be approved by the commission. Any addition of software applications or modifications by anyone other than a licensed manufacturer or its designated representative to an approved electronic card-minding system is prohibited.

(4) Once a card-minding system or component has been approved, the commission may keep the card-minding system or component for further testing and evaluation for as long as the commission deems necessary. The manufacturer shall make provisions to retrieve the card-minding system or component if requested by the commission, at the manufacturer's expense. Failure to do so will result in the manufacturer relinquishing its rights to the system or component and the commission shall dispose of the system or component as it deems appropriate.

(d) Manufacturing Requirements.

(1) A manufacturer of a card-minding device must manufacture each associated site system to include a point of sale station and an internal accounting system that is capable of recording the licensed authorized organization's sale of card-minding devices, disposable bingo cards, and pull-tabs.

(2) A manufacturer of a card-minding device must ensure that the associated site system has dial-up capability, so that the commission may remotely verify the operation, compliance and internal accounting systems of the site system at any time. The manufacturer shall provide to the commission all current protocols, passwords, and any other required information needed to access the system. Any and all reports maintained or generated by the card minding system shall be capable of being downloaded or otherwise accessed via the modem.

(3) A manufacturer of a card-minding device must manufacture each associated site system to ensure that an internal accounting system records and retains for a period of not less than twelve months:

(A) the serial number of each bingo card sold for card-minding device use;

(B) the price of each card or card package sold;

(D) the total number of card faces sold for use with card-minding devices for each occasion;

(E) the serial number of each portable electronic card-minding device sold; and

(F) the terminal number or account number associated with each fixed-base card-minding device sold.

(4) The information referenced in subsection (d)(3) of this section must be secure and shall not be accessible for alteration during the occasion. The site system must also have report generation software with the capability to print, for a period of twelve months, all information required to be maintained on the site system's active or archived databases.

(5) A manufacturer of a card-minding device must manufacture each associated site system to ensure that the applicable point of sale station is capable of printing a receipt for each sale or void of an electronic or paper card face product that includes, at a minimum, the following information:

(A) the date and time of the transaction;

(B) the dollar value of the transaction and quantity of associated products;

(D) the session in which the product was sold.

(6) A manufacturer of a card-minding device must manufacture each associated site system to ensure that the applicable point of sale station is capable of printing a receipt for each sale or void of an electronic product that includes, at a minimum, the following information in addition to the information in paragraph (5) of this subsection:

(A) each card face serial number or range of serial numbers;

(B) the serial number of each portable card-minding device sold; and

(7) A card-minding system may include player tracking software. Records generated by the use of the player tracking software are subject to review by the commission. The records should be available either at the card-minding system location or retrievable via dial up modem. The records must be maintained for a period of not less than twelve months. Player tracking records shall at all times be the property of the licensed authorized organization and neither the manufacturer nor the distributor shall utilize or make available to any person, other than the commission or as otherwise authorized by law, the information contained within the player tracking software without the express written permission of the licensed authorized organization.

(8) A manufacturer of a card-minding device must manufacture each associated site system to include a caller station verifier that is able to verify winning cards and to print the cards for posting. The caller station verifier must be capable of posting all balls called for verification purposes and print an ordered list of the called balls.

(9) A manufacturer of a card-minding device shall employ sufficient security safeguards in designing and manufacturing the card-minding system such that it may be verified that all proprietary software components are authentic copies of the approved software components and all functioning components of the card-minding system are operating with identical copies of approved software programs. The device must also have sufficient security safeguards so that any restrictions or requirements authorized by the commission or any approved proprietary software are protected from alteration by unauthorized personnel. Examples of security measures that may be employed to comply with these provisions are the use of dongels, digital signature comparison hardware and software, secure boot loaders, encryption, and key and callback password systems.

(10) A manufacturer of a card-minding device shall ensure that the card-minding system does not allow a card-minding device to be used to obtain a bingo prize for any bingo game other than for a game within the bingo occasion for which the card-minding device was sold.

(11) A manufacturer of a card-minding system shall ensure that a card-minding device does not allow any bingo games or card faces other than those purchased by the patron to be available for play.

(12) A manufacturer of a card-minding device shall ensure that a card-minding device is not capable of playing in excess of sixty-six card faces per game.

(13) The toll-free "800" number operated by the Problem Gamblers' Help Line of the Texas Council on Problem and Compulsive Gambling must be displayed on each card-minding device in such a manner that it is conspicuous and clearly visible to a player using the card-minding device or displayed on the screen of the card-minding device in such a manner that it is conspicuous and clearly visible to a player using the card-minding device at all times and printed on the receipt issued to the player using the card-minding device. If labels are placed on the card-minding device, the manufacturer must furnish labels to the distributor. The licensed authorized organization is responsible for the placement of labels on each device.

(e) Distributor Requirements.

(1) Before initial use by a licensed authorized organization, each distributor that leases, sells or otherwise furnishes a card-minding system must notify the commission in writing on a form prescribed by the commission or electronically in a format prescribed by the commission that includes the following information:

(A) the modem number and total number of card-minding devices installed at the bingo premises;

(B) the name of the bingo premises, physical address, telephone number, and licensed commercial lessor's taxpayer identification number, where the card-minding system is located;

(D) the model, version and serial numbers or terminal numbers of the card-minding devices and site system equipment;

(E) the name, and taxpayer identification number of the licensed authorized organization to whom the card-minding system was sold, leased, or otherwise furnished; and

(F) the name, and taxpayer identification number of the manufacturer or distributor from whom the card-minding system was leased, purchased or otherwise obtained.

(2) Each distributor that leases, sells or otherwise furnishes a card-minding system must notify the commission in writing on a form prescribed by the commission or electronically in a format prescribed by the commission of the make, model and serial or terminal number of each card-minding device that will be utilized at multiple locations. Additionally, if a card-minding device is to be used at more than one bingo premises the following must occur:

(A) each location must have its own separate site system;

(B) the distributor must list all card-minding devices at each bingo premises and must include a separate report indicating at what time and at what playing location the units will be located.

(3) Each distributor that leases, sells or otherwise furnishes a card-minding system must notify the commission in writing on a form prescribed by the commission or electronically in a format prescribed by the commission which will include the same information required in subsection (e)(1) of this section for each card-minding device that is removed or added from a bingo premises on a quarterly basis. Before the complete removal or hardware up-grade of any card-minding system, each licensed authorized distributor must supply a copy of the data files to each licensed authorized organization who utilized the card-minding system.

(4) Each distributor shall provide labels displaying the toll-free "800" number operated by the Problem Gamblers' Help Line of the Texas Council on Problem and Compulsive Gambling to each licensed authorized organization for placement on each card-minding device.

(f) Licensed Authorized Organization Requirements.

(1) Each licensed authorized organization shall maintain written guidelines relating to the compliance of Occupations Code, Section 2001.409(b).

(2) Each licensed authorized organization shall conspicuously display during all bingo occasions a sign provided by the commission, indicating the number of individuals attending a bingo occasion that may use card-minding devices. In January of each year, the commission shall determine the number of individuals attending a bingo occasion that may use an electronic card-minding device based on the average of two quarters from the preceding four years that result in the highest average attendance per occasion. The commission shall provide each licensed authorized organization with a sign, 8 1/2 X 11, to be posted for the ensuing year.

(3) Each licensed authorized organization shall be responsible for ensuring that the toll-free "800" number operated by the Problem Gamblers' Help Line of the Texas Council on Problem and Compulsive Gambling is prominently displayed on each card-minding device.

(4) The licensed authorized organization must ensure that the dial-up phone lines remain attached to the site systems at all times and are operational.

(g) Inspection. The commission may examine and inspect any card-minding system, including any individual card-minding device and related site system. Such examination and inspection includes immediate access to the card-minding device and unlimited inspection of all parts of the card-minding system.

(h) Records.

(1) Each manufacturer selling, leasing or otherwise furnishing a card-minding device or system must maintain a single log or other record showing the following:

(A) the date the distributor obtained the card-minding device or system from the manufacturer;

(B) the model, version and serial number of each portable card-minding device;

(D) the model and version number of all components of the site system software; and

(E) the distributor's name and taxpayer identification number to whom the card-minding system was sold, leased or otherwise furnished.

(2) A manufacturer selling, leasing, or otherwise providing card-minding devices or systems to a distributor must provide the distributor with an invoice or other documentation that contains, at a minimum, the following information and must maintain copies of the invoice or documentation for a period four years:

(A) the date of sale or period covered by the invoice;

(B) quantity sold or leased; and

(3) Each distributor selling, leasing, or otherwise furnishing card-minding systems must maintain a single log or other record showing the following information:

(A) the modem number and quantity of card-minding devices at each bingo premises;

(B) the name of the bingo premises, physical address, telephone number, and licensed commercial lessor's taxpayer identification number where the card-minding system is located;

(D) the model, version and serial numbers or terminal numbers of the card-minding devices and site system equipment ;

(E) the name and taxpayer identification number of the licensed authorized organization or distributor to whom the card-minding device or system was sold, leased or otherwise furnished; and

(F) the name, and taxpayer identification number of the manufacturer or distributor from whom the card-minding device or system was purchased, leased or otherwise obtained.

(4) A distributor selling, leasing, or otherwise providing card-minding systems to a licensed authorized organization or distributor must provide the licensed authorized organization or distributor with an invoice or other documentation that contains, at a minimum, the following information and must maintain copies of the invoice or documentation for a period four years:

(A) the date of sale or period covered by the invoice;

(B) quantity sold or leased; and

(5) Each licensed authorized organization purchasing, leasing, or otherwise utilizing a card-minding system must maintain a log or other records showing the following:

(A) the date the card-minding system was installed or removed; and

(B) the name, and taxpayer identification number of the distributor from which the card-minding system was purchased, leased or otherwise obtained.

(6) If multiple licensed authorized organizations hold an interest in a card-minding system, a single record identifying each licensed authorized organization must be retained on the premises where the card-minding system is utilized.

(7) All records, reports and receipts relating to the card-minding systems' sales, maintenance, and repairs must be retained by the licensed authorized organization on the premises where the licensed authorized organization is licensed to conduct bingo or at a location designated in writing by the licensed authorized organization for a period of four years for examination by the commission. Written notice of any change in the designated playing location or modem number must be received by the commission at least ten days prior to the change.

(8) Each licensed authorized organization that provides card-minding devices for bingo players' use shall maintain for four years reports for each occasion that provides the following information:

(A) the date and time of the session;

(B) the total number of card-minding devices sold;

(D) the total amount of sales of card-minding devices;

(E) the serial numbers of card faces used with each card-minding devices;

(F) the total sales amount of disposable card packages if any sold to be used with card-minding devices; and

(G) the total sales amount of disposable card packages sold.

(9) Each licensed authorized organization must record all bingo sales, including sales of card-minding devices and/or disposable cards, on a point of sale station.

(i) Restrictions.

(1) No manufacturer, distributor or licensed authorized organization may display, use or otherwise furnish a card-minding device which has in any manner been marked, defaced, tampered with, or which otherwise may deceive the player or affect a player's chances of winning.

(2) A card-minding device may be used by a bingo player only when operated in the following manner:

(A) The bingo player must perform at least the following functions:

(i) input each number or symbol called by the licensed authorized organization into the memory of the card-minding device by use of a separate and distinct action for each number or symbol called. Automatic marking of numbers or symbols is prohibited;

(ii) notify the licensed authorized organization when a winning pattern or "bingo" occurs by means that do not utilize the card-minding device or the associated system; and

(iii) identify the winning card face and display the card face to the licensed authorized organization.

(B) The bingo player must be physically present on the premises where the game is actually conducted during the game that is actually being conducted.

(3) No licensed authorized organization shall require a player to use a card-minding device to participate in a game of bingo.

(5) A distributor and/or licensed authorized organization may not add or remove any software programs to an approved card-minding system without the permission of the manufacturer. If the commission detects or discovers a card-minding system at a bingo premises that is using components or software that were required to have been approved by the commission but have not been approved, the card-minding system is deemed to have an unauthorized modification.

(6) A manufacturer's demonstration of a non-approved card-minding system or any secondary component may take place only after permission is granted by the commission. The commission may request a manufacturer to voluntarily demonstrate a bingo product to the commission staff that the manufacturer markets in another jurisdiction.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on May 29, 2003.

TRD-200303296

Kimberly L. Kiplin

General Counsel

Texas Lottery Commission

Earliest possible date of adoption: July 13, 2003

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