TITLE 16.ECONOMIC REGULATION

Part 9. TEXAS LOTTERY COMMISSION

Chapter 402. BINGO REGULATION AND TAX

The Texas Lottery Commission (Commission) proposes new §§402.100 - 402.103, 402.200 - 402.203, 402.300 - 402.304, 402.400 - 402.407, 402.500 - 402.504, 402.600 - 402.603, and 402.700 - 402.705. These new Bingo Regulation and Tax provisions will make nonsubstantive changes, including: (1) renaming Chapter 402 the "Charitable Bingo Administrative Rules"; (2) reorganizing Chapter 402 into subchapters; (3) updating legal citations; and (4) deleting references to obsolete dates.

The Commission will publish the repeal of Chapter 402 by separate action.

The new rules are structured into seven subchapters. Subchapter A, §§402.100 - 402.103, Administration; Subchapter B, §§402.200 - 402.203, Conduct of Bingo; Subchapter C, §§402.300 - 402.304, Bingo Games and Equipment; Subchapter D, §§402.400 - 402.407, Licensing Requirements; Subchapter E, §§402.500 - 402.504, Books and Records; Subchapter F, §§402.600 - 402.603, Payment of Taxes, Prize Fees and Bonds; and Subchapter G, §§402.700 - 402.705, Compliance and Equipment. These rules are promulgated under Occupations Code, §2001.054, which authorizes the Commission to adopt rules necessary to enforce and administer the Bingo Enabling Act.

Lee Deviney, Financial Administration Director, has determined there will be no significant fiscal impact for state or local government as a result of the proposal and subsequent adoption of the new Chapter 402. Any costs to the State could be absorbed by current resources. For each year of the first five years the new chapter will be in effect, the fiscal impact is the following: FY 05, $0, FY 06, $0; FY 07, $0; FY 08, $0, FY 09, $0. Additionally, there will be no effect on small businesses, micro businesses or local or state employment.

William L. Atkins, Director, Charitable Bingo Operations Division, has determined that for each of the first five years the new Chapter 402 as proposed is in effect, the public will benefit from the adoption.

Comments on the proposed new rules may be submitted to Sandra Joseph, Assistant General Counsel, Texas Lottery Commission, P.O. Box 16630, Austin, Texas 78761-6630. The Commission will hold a public hearing on this proposal at 10:00 a.m. on February 3, 2005. Comments must be received within 30 days after publication of these proposed new rules in order to be considered.

Subchapter A. ADMINISTRATION

16 TAC §§402.100 - 402.103

The new sections are proposed pursuant to Occupations Code, §2001.054, which authorizes the Commission to adopt rules necessary to enforce and administer the Bingo Enabling Act.

Occupations Code, Chapter 2001 is affected by the proposed new sections.

§402.100.Definitions.

The following words and terms, when used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise.

(1) Bingo premises--The area subject to the direct control of, and actual use by, a licensed authorized organization for the purpose of conducting a game of bingo.

(2) Break-open bingo ticket--An instant bingo card commonly known as an instant bingo ticket, pull-tab bingo game or instant bingo card as defined by §402.300 of this chapter.

(3) Calendar week--A period of seven consecutive days commencing with Sunday and ending with Saturday.

(4) Calendar year--A period of 12 consecutive months commencing with January 1 and ending with December 31.

(5) Card-minding device--Any mechanical, electronic, electromechanical or computerized device, and including related hardware and software, that is interfaced with or connected to equipment used to conduct a game of bingo and which allows a player to store, display, and mark a bingo card face five spaces wide by five spaces long, the center space free, and the other spaces containing pre-printed numbers between 1 and 75, inclusive. A card-minding device shall not be a video lottery machine as defined by H.B. 3021, §10, 74th Leg. R.S., 1995.

(6) Commission--The Texas Lottery Commission, the agency created by H.B. 54, 72nd Leg., 1st C.S. (1991), as amended by H.B. 1587 and H.B. 1013, 73rd Leg. R.S., 1993.

(7) Conductor--A licensed authorized organization.

(8) Director--The Director of the Charitable Bingo Operations Division, commonly known as the bingo division, of the Commission.

(9) Executive Director--The Executive Director of the Commission.

(10) Instant bingo card--An instant bingo ticket, pull-tab bingo game, break-open bingo ticket or instant bingo card as defined by §402.300 of this chapter.

(11) Instant bingo ticket--An instant bingo card commonly known as a break-open bingo ticket, a pull-tab bingo game or an instant bingo card as defined by §402.300 of this chapter.

(12) Location--The area subject to the direct control of, and actual use by, a licensed authorized organization for the purpose of conducting a game of bingo.

(13) Operator--A natural person designated pursuant to authority of the Bingo Enabling Act.

(14) Place--The area subject to the direct control of, and actual use by, a licensed authorized organization for the purpose of conducting a game of bingo.

(15) Primary business office--The physical location at which all records relating to the primary purpose(s) of a licensed authorized organization are maintained in the ordinary course of business.

(16) Pull-tab bingo game--An instant bingo card commonly known as a break-open bingo ticket, an instant bingo ticket or an instant bingo card as defined by §402.300 of this chapter.

(17) 24-hour period--A period of 24 consecutive hours commencing at 12:00 midnight.

(18) Working day--Other than a Saturday, Sunday or holiday authorized by law, a period of nine consecutive hours commencing at 8:00 a.m. and ending at 5:00 p.m.

§402.101.Advisory Opinions.

(a) Time Period

(1) The Commission shall respond to an advisory opinion request not later than the 60th day after the later date of when the Commission receives the written request containing sufficient facts or receives the additional information pursuant to a request for additional information to provide an answer on which the requestor may rely. However, if the Commission requests an attorney general opinion on a matter that is the subject of an advisory opinion request the deadlines are tolled until 30 days following the issuance of the attorney general opinion.

(2) The Commission shall notify the person making the request of the date the advisory opinion request is received and of the advisory opinion number.

(3) The authority granted by Occupations Code, §2001.059, is delegated to the Charitable Bingo Operations Director or his designee. The General Counsel must approve the advisory opinion prior to the issuance of the advisory opinion by the Charitable Bingo Operations Director. The Commission by separate order may delegate to an employee of the Commission the authority granted.

(4) The Commission retains the authority to issue advisory opinions pursuant to Occupations Code, §2001.059. The delegation of authority merely augments the Commission's ability to perform the duties and functions of the Commission with respect to issuing advisory opinions.

(b) Request for an Advisory Opinion

(1) A person requesting an advisory opinion shall do so by sending the request in writing addressed to Advisory Opinion, Charitable Bingo Operations Division, Texas Lottery Commission, P.O. Box 16630, Austin, Texas 78761-6630 or by e-mail to Advisory.Opinion@lottery.state.tx.us.

(2) A request for an advisory opinion shall describe a specified factual situation. The request shall make clear that it is a request for an advisory opinion under Occupations Code, §2001.059, and state in sufficient detail all facts upon which the request for opinion is based to permit the Commission to provide a response to the request and shall contain the name and address of the person requesting the opinion. The request may be accompanied by supporting legal arguments and citations of law or rules as the requesting person deems pertinent. Any other person may also submit legal arguments, citations of law or rules, or legal briefs within 30 days of the date of the request for opinion.

(1) If the Commission determines that the request for an advisory opinion does not contain sufficient facts to provide an answer, the Commission shall request additional written information from the requestor not later than ten days after the request for advisory opinion was received by the Commission.

(2) If no additional information is supplied in response to the Commission request for additional written information from the requestor, after the Commission determines that the request does not contain sufficient facts to provide an answer, then no opinion can be issued and the advisory opinion request file will be closed. In this instance, the requestor will be given a statement that no opinion can be expressed with regard to a given fact situation due to the failure to supply additional information.

(3) The response to a Commission request for additional information shall be addressed to Advisory Opinion, The Charitable Bingo Operations Division, Texas Lottery Commission, P.O. Box 16630, Austin, Texas 78761-6630 or by e-mail to Advisory.Opinion@lottery.state.tx.us in order to permit the Commission to provide a response to the request.

(d) Subject of an Advisory Opinion

(1) The Commission will not issue an advisory opinion that concerns the subject matter of pending litigation or contested case notice of hearing known to the Commission other than to provide a response which refers to the applicable statutes and rules cited in the pending litigation or contested case proceeding notification.

(2) An advisory opinion cannot resolve a disputed question of fact other than to provide a response which refers to the applicable statutes and rules.

(e) Response

(1) A request for an advisory opinion that contains sufficient facts shall initially be referred to any appropriate personnel within the Charitable Bingo Operations Division for review and written comment.

(2) If the Commission determines that a request for an advisory opinion has already been answered by the Commission, then the Commission may provide a written response to the requestor that cites the prior advisory opinion.

(3) The Commission may publish the response on its website.

(4) The response shall clearly state that the opinion is advisory in nature and is restricted to the fact situation identified in the opinion.

(5) An advisory opinion may be relied upon by the requestor as well as any other person whose conduct is substantially consistent with the opinion and the facts stated in the request.

(6) The Commission cannot grant nor confer legal authority beyond the statute or rule which is the subject of the request for advisory opinion.

(7) A previously issued advisory opinion not in accord with the current Commission statutes and rules may be modified or revoked, but in such an instance the modification or revocation shall operate prospectively only.

§402.102.Bingo Advisory Committee.

(a) Purpose. The purpose of the Bingo Advisory Committee (BAC) is to advise the Commission on the needs and problems of the state's bingo industry; report to the Commission on the committee's activities; and perform other duties as determined by the Commission. The BAC's sole duty is to advise the Commission. The BAC has no executive or administrative powers or duties with respect to the operations of the Charitable Bingo Operations Division; all such powers and duties rest solely with the Commission.

(b) Composition. The following appointments shall be made representing a balance of interests: General Public--one; Charities that operate bingo games--three; Lessor, Charity--one; Lessor, Commercial--two; Distributor/Manufacturer--one; System Service Provider--one.

(1) The nomination period will be specified by the Commission. Nominations must be submitted on a form prescribed by the Commission prior to the close of the nomination period. All information requested on the nomination form must be correct and complete.

(2) With the exception of a nominee to the "Lessor, Charity" position, a nominee may not be listed in the licensing information that is required to be filed with the Commission in any other category than the one for which the person is nominated.

(3) A nominee to the "General Public" category may not be listed in the licensing information that is required to be filed with the Commission.

(4) A total of nine members will be appointed by the Commission. Each member will be appointed for a three-year term or until his/her successor has been appointed and will serve at the pleasure of the Commission. Members hold office for staggered terms of three years so that three members' terms expire February 1 of each year.

(5) A person is ineligible to serve as a member of the BAC if he/she represents an organization licensed by the Commission that is delinquent in any liability to the state or if he/she represents an organization licensed by the Commission that has a license denied, revoked or suspended by the Commission.

(d) Officers. Annually, the BAC shall select from among its members a presiding officer. The presiding officer will conduct meetings and general business. The presiding officer will designate a member of the BAC to conduct meetings and general business in the absence of the presiding officer.

(e) Reports. The Committee will report, at a minimum, quarterly to the Commission on the BAC's activities, and more frequently as deemed appropriate and necessary by the BAC presiding officer. Annually, the BAC will report to the Commission with specific recommendations for improvement, the status of the following areas relating to charitable bingo in Texas:

(1) gross receipts;

(2) charitable distributions;

(3) expenses;

(4) attendance; and

(5) any other area requested by the Commission.

(f) Meetings. The BAC shall meet quarterly or at the call of the Commission. BAC meetings may be held at a location in Texas other than Austin, subject to the discretion of the Charitable Operations Bingo Director. The meetings shall be open meetings in accordance with the Open Meetings Act, Government Code, Chapter 551. The committee shall keep minutes of each meeting. The minutes shall be approved at the next following meeting, shall reflect all formal action taken by the committee, and shall be filed, upon approval, with the Charitable Bingo Operations Director. The BAC may consider a transcript prepared by a court reporter to be the minutes of the meeting.

(g) Attendance. The failure by any BAC member to attend two consecutive regular quarterly meetings, for any reason, may be cause for removal by the Commission. No proxy voting shall be allowed. A member may not substitute another person in his/her absence.

(h) Criminal History Review. All BAC members must meet the criminal history standards set out in Occupations Code, Chapter 2001. A member who fails to meet such criminal history standards will be disqualified from serving on the BAC and will be removed from the BAC. The decision by the Commission to remove a member of the BAC is final.

(i) Compensation and Travel Expenses. A member of the BAC is entitled to reimbursement for reasonable expenses. Reasonable expenses shall be limited to those expenses set out in the current Appropriations Act, shall be reimbursed in accordance with the current Appropriations Act, and shall not exceed the maximum allowed amount as set out in the Comptroller of Public Accounts Travel Guidelines. BAC members shall submit expenses on a form provided by the Commission and shall be accompanied by appropriate receipts. Expenses can be reimbursed to members only if the legislature has specifically appropriated funds for that purpose.

(j) Duration. The BAC will automatically be abolished and cease to exist on August 31, 2005. The BAC shall only remain in existence beyond August 31, 2005, if the Commission affirmatively votes to continue the Bingo Advisory Committee in existence.

(k) Removal. A member of the BAC may be removed if he/she represents an organization licensed by the Commission that is delinquent in any liability to the state or if he/she represents an organization licensed by the Commission that has a license denied, revoked or suspended by the Commission. The decision by the Commission to remove a member of the BAC is final.

(l) Evaluation of BAC Costs and Effectiveness. The Commission shall evaluate annually:

(1) BAC's work;

(2) BAC's usefulness; and

(3) the costs related to BAC's existence, including the cost of Commission staff time in support of BAC's activities.

§402.103.Training Program.

(a) Notice of Registration and Training.

(1) Notice of the training program will be provided to a licensed authorized organization at the address provided to the Commission by the licensed authorized organization as part of the licensed authorized organization's license file.

(2) The notice will inform the licensee of the training offered in the licensee's geographic area and the process to register for the training. Pre-registration is required in order to attend training. Persons pre-registering must provide, at a minimum, the name of the individual, name of organization, eleven-digit taxpayer identification number of the organization, person's position within the organization, and information on how to contact pre-registrant, such as telephone number, facsimile number, mailing address, and, if applicable, E-mail address.

(3) The training may be cancelled for good cause. In the event the Charitable Bingo Operations Division cancels the training, notice will be provided to licensees who have pre-registered for training.

(b) Persons Required to Complete Training.

(1) At all times, at least one of the persons designated by each licensed authorized organization under Occupations Code, §2001.102(b)(10) must be an individual who has completed the training. The training must be completed biannually.

(2) Multiple persons from a licensed authorized organization may attend training. However, the Charitable Bingo Operations Division may limit the number of persons attending for a licensed authorized organization in order to ensure persons for other licensed authorized organizations have the opportunity to attend training.

(3) Each individual attending the training program must complete an affidavit of attendance, on a form prescribed by the Commission, which will include, at a minimum, the legible name, signature, organization name and eleven-digit taxpayer identification number.

(4) Each individual attending the training shall, prior to the beginning of the training, submit on a form prescribed by the Commission, which will include, at a minimum, the legible name, signature, organization name and eleven-digit taxpayer identification number, a statement that he/she has read the Bingo Enabling Act and Charitable Bingo Administrative Rules in their entirety in preparation for the training. The total number of hours credited for reading these materials shall be three hours.

(5) Only licensed authorized organizations holding an annual license to conduct bingo are required to have an individual attend training.

(6) Persons who satisfactorily complete the training, as determined by the Charitable Bingo Operations Division, will receive a Certificate of Completion. The Certificate of Completion shall, at a minimum, include: the name of the individual completing the training, the date and location of the training, and eleven-digit taxpayer identification number of the licensed authorized organization.

(7) A person may complete training for one licensed authorized organization only.

(8) All expenses or costs of attendance by any member of the licensed authorized organization may be paid from the licensed authorized organization's bingo bank account. Expenses and costs are limited to travel, lodging, meals, and materials. Documentation must be maintained by the licensed authorized organization supporting the payment of all costs or expenses. All costs and expenses must be reasonable and necessary.

(d) Content of the Training. The training program will cover, at a minimum, the following areas:

(1) General information about the Bingo Enabling Act and Charitable Bingo Administrative Rules;

(2) Conducting a bingo game;

(3) Record keeping requirements;

(4) Administration and operation of charitable bingo;

(5) Promotion of a bingo game;

(6) Bingo Advisory Committee; and

(7) General information about the license application process.

(e) Time requirements.

(1) For the individuals required to complete training, each individual must complete the training every two years.

(2) At least one of the persons designated under Occupations Code, §2001.102(b)(10) must have completed the training within 24 months prior to the date of expiration of the license.

(3) An organization that is issued an annual license to conduct bingo based on the filing of an original application shall have at least one of the persons designated under Occupations Code, §2001.102(b)(10) complete the training within 12 months of the issuance of the license.

(f) Reporting requirements.

(1) Each licensed authorized organization must submit to the Charitable Bingo Operations Division the name(s) of the trained individuals. Any change in this information must be submitted to Charitable Bingo Operations Division within ten days after the date of the change.

(2) Each licensed authorized organization shall maintain for a period of four years the Certification of Completion in its records.

(3) Failure to maintain documentation relating to the training program or failure to timely furnish information requested by the Commission may subject the licensee to disciplinary action.

(4) Altering or falsifying any information required to be submitted or maintained in connection with the training program identified in this rule may subject the licensee to disciplinary action.

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 January 7, 2005.

TRD-200500077

Kimberly L. Kiplin

General Counsel

Texas Lottery Commission

Earliest possible date of adoption: February 20, 2005

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

Subchapter B. CONDUCT OF BINGO

16 TAC §§402.200 - 402.203

The new sections are proposed pursuant to Occupations Code, §2001.054, which authorizes the Commission to adopt rules necessary to enforce and administer the Bingo Enabling Act.

Occupations Code, Chapter 2001 is affected by the proposed new sections.

§402.200.General Restrictions on the Conduct of Bingo.

(a) Advertising. Any advertising or promotion of a bingo occasion shall clearly identify the conductor, by name as shown exactly as it is shown on the license.

(b) Inspection of equipment, tampering prohibited. All bingo equipment is subject to inspection at any time by any representative of the Commission. No licensee may tamper with or modify any bingo equipment in any manner which would affect the randomness of numbers chosen or which changes the numbers or symbols appearing on the face of a bingo card. A licensed authorized organization has a continuing responsibility to ensure that all bingo equipment used by it is in proper working condition.

(1) owned by the conductor;

(2) owned by a governmental agency;

(3) leased, or used only by the holder of a temporary license; or

(4) owned or leased by a licensed commercial lessor.

(d) Merchandise prizes. Any merchandise awarded as a prize in a bingo occasion shall be valued at its current retail price. If a merchandise prize is donated to a licensed organization, it may not be reported as an expenditure for any purpose.

(e) Notice of law and regulation. Each conductor shall obtain, maintain, keep current and make available for review to any person upon request a copy of the Bingo Enabling Act and the Charitable Bingo Administrative Rules.

(f) Notification of name of operator. Each conductor shall conspicuously display during all bingo occasions a sign indicating the name of the operator in charge of the occasion. The letters on the sign shall be no less than one inch tall. The sign shall inform the players at that location that they should direct any questions or complaints regarding the conduct of the bingo occasion to the operator listed on the sign. The sign should further state that if the player is not satisfied with the response given by the operator that the player has the right to contact the Commission and file a formal complaint.

(g) Reservation of bingo cards. Except where otherwise expressly permitted by this chapter, no conductor may reserve, or allow to be reserved, any bingo card or cards for use by a bingo player.

(h) Workers and employees prohibited from playing. No bingo occasion shall be continued if, during such occasion, any worker or employee who is conducting or assisting in the conduct of the occasion participates as a player, either directly or by surrogate.

(i) Verification.

(1) Verification of winning cards. The numbers appearing on the winning card must be verified at the time the winner is determined and prior to prize(s) being awarded in order to insure that the numbers on the card in fact have been drawn from the receptacle. This verification shall be done either in the immediate presence of one or more players at a table or location other than the winners, or displayed on a TV monitor visible by all of the players, or by an electronic verifier system visible by all the players. Each winning disposable paper card or an electronic representation of the card shall also be posted on the licensed premises where it may be viewed in detail by the players until at least 30 minutes after the completion of the last bingo game of that organization's occasion.

(2) Verification of numbers drawn. Any player may request a verification of the numbers drawn at the time a winner is determined and a verification of the balls remaining in the receptacle and not drawn. Verification shall take place in the immediate presence of the operator, one or more players other than the winner, and player requesting the verification.

§402.201.Prohibited Bingo Occasion.

No licensee shall commence or continue a bingo occasion unless an active member that has been designated pursuant to the Occupations Code, §2001.411, is physically present at the bingo premises and is actively supervising and directing the bingo occasion. Any occasion, and any game of bingo, conducted in violation of this provision is a violation of the Bingo Enabling Act.

§402.202.Transfer of Funds.

(a) A licensed authorized organization or an organization applying for a license to conduct bingo may request permission to loan money from its general fund to its bingo account for necessary expenses by submitting a completed Bingo Financial Summary which includes the organization's actual or estimated:

(1) monthly bingo income;

(2) monthly bingo expenses;

(3) employee payroll;

(4) one time expense;

(5) amount of funds to be transferred; and

(6) balance of its general fund prior to the requested transfer of funds.

(b) Prior to approval the Director must find that:

(1) the loan is necessary;

(2) the repayment schedule is reasonable; and

(3) the loan can be repaid within a 12 month period.

(c) The Director may consider the organization's financial condition as reflected in all available information including past quarterly reports prior to the approval of the loan request.

(d) When a loan is approved by the Director, the loan transaction must be reported on the organization's quarterly report as follows:

(1) the loan transaction must be reported as "Approved Loan Proceed" for the quarter in which the loan was approved; and

(2) loan payments must be reported as "Loan Repayment" for the quarter in which they are paid.

(e) If the loan is not paid back to the organization's general fund by the later of the renewal date of the license or the time period allowed under subsection (b), then the Charitable Bingo Operations Division may initiate disciplinary action.

§402.203.Unit Accounting.

(a) The provisions of this rule relate only to the accounting, reporting and operation of units in accordance with the Bingo Enabling Act and this chapter. Nothing in this rule shall be construed as a grant of authority or waiver of responsibility under federal law, including tax law, and other state law.

(b) Definitions. In addition to the definitions provided in §402.100 of this chapter, and unless the context in this section otherwise requires, the following definitions apply:

(1) Unit's net proceeds--means the unit's gross receipts less prizes awarded and authorized expenses.

(2) Default--The term used to describe the status of a licensed authorized organization that does not timely pay for the sale or lease of bingo supplies or equipment as provided in Occupations Code, §2001.218.

(c) Licensed authorized organizations forming a unit, must notify the Commission in writing prior to operating as a unit.

(d) Each unit will be assigned an identification number by the Commission.

(e) A licensed authorized organization joining or withdrawing from a unit at any time other than at the beginning or ending of a reporting quarter is responsible for filing a separate quarterly report for bingo activities conducted apart from the unit.

(f) Any change in the membership of a unit will require the unit to notify the Commission within 15 days.

(g) Unit's Use of Proceeds.

(1) All distributions of net proceeds of the unit shall be paid from the unit's bingo account to the account or charitable use designated by the unit member. Each unit member is required to maintain adequate records establishing that the account or use of such net proceeds is used in accordance with Occupations Code §2001.454.

(2) All prize fees collected in accordance with Occupation Code, §2001.502 must be deposited in the unit's bingo bank account and paid from the unit's bingo bank account.

(3) All funds paid to or on behalf of a unit member shall be used in accordance with Occupations Code, §2001.454 and this chapter.

(h) Unit Transactions.

(1) Upon prior written consent by the Commission:

(A) a licensed authorized organization may make a sale of bingo cards, instant bingo tickets, or a used bingo flash board or blower to a unit;

(B) a unit may make a sale of bingo cards, instant bingo tickets, or a used bingo flash board or blower to a licensed authorized organization; or

(2) If a member of a unit is in default, a person may not sell or transfer bingo equipment or supplies to the unit on terms other than immediate payment on delivery, unless otherwise authorized by the Commission.

(i) Unit Recordkeeping.

(1) Each unit must file a quarterly report, on a form prescribed by the Commission and maintain records to substantiate the contents of the report.

(2) A member of a unit which is also licensed as a commercial lessor must continue to file the "Texas Bingo Lessor's Quarterly Report" and remit the taxes on rental income.

(3) Each member of a unit must file a quarterly report, on a form prescribed by the Commission, and maintain records to substantiate the contents of the report.

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 January 7, 2005.

TRD-200500076

Kimberly L. Kiplin

General Counsel

Texas Lottery Commission

Earliest possible date of adoption: February 20, 2005

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

Subchapter C. BINGO GAMES AND EQUIPMENT

16 TAC §§402.300 - 402.304

The new sections are proposed pursuant to Occupations Code, §2001.054, which authorizes the Commission to adopt rules necessary to enforce and administer the Bingo Enabling Act.

Occupations Code, Chapter 2001 is affected by the proposed new sections.

§402.300.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 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 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.

§402.301.Bingo Card/Paper.

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

(1) Bingo card/paper. A hard card, disposable bingo card/paper, shutter card, or any other bingo card/paper approved by the Commission.

(2) Bingo hard card. A device made of cardboard, plastic or other suitable material that is intended for repeated use of the bingo card at multiple bingo occasions.

(3) Bonus number(s). A type of bingo card/paper that has an identified number or numbers which when called could result in an additional prize awarded.

(4) Braille bingo card. A device that contains raised symbols that reflect numbers on a reusable card.

(5) Break-open bingo. A type of disposable bingo card/paper that is sealed, that conceals the bingo card/paper face, that may be folded, and where the bingo game or a portion of the bingo game has been pre-called.

(6) Case. A receptacle that contains bingo card/paper products.

(7) Cut. Indicates the direction in which a sheet of faces will be cut from the master sheet of disposable bingo card/paper. A cut can be square, horizontal or vertical. The sheet of disposable bingo card/paper printed by the manufacturer of a specific group of disposable bingo card/paper that can be subdivided vertically or horizontally into sheets.

(8) Defective. Bingo card/paper missing specifications as originally approved by the Commission.

(9) Disposable bingo card/paper. A sheet or sheets of paper that is designed or intended for use at a single bingo occasion.

(10) Double numbers. Bingo card/paper with two numbers in each of the 24 spaces on each face.

(11) Face. A specific configuration of numbers, symbols, or blank squares imprinted on paper, cardboard, or other materials, and designed to be used to conduct bingo games. The bingo card/paper normally consists of five rows of five columns that may bear 24 pre-printed numbers between 1 and 75, symbols, or blank squares, except for the center square which is a free space and have the letters B-I-N-G-O appear in order above the five columns, with the exception of bonus number(s) that may appear on the bingo card/paper.

(12) Free space. The center square on the face of a bingo card/paper.

(13) Loteria. A type of bingo that utilizes symbols or pictures. Normally playing cards are utilized instead of numbered balls.

(14) Multi-part card/paper. A type of disposable bingo card/paper where the player selects the numbers. The player retains one part of the disposable bingo card/paper while the licensee for the purpose of verification retains the other part of the disposable bingo card/paper.

(15) On. The number of faces imprinted on a sheet of disposal bingo card/paper after it is cut. The number of bingo card/paper faces normally precedes this term.

(16) Pre-marked. A bingo card/paper where one or more of the numbers are already marked or identified prior to the start of the game.

(17) Product line. A specific type of bingo card/paper, identifiable by features or characteristics that are unique when compared to other bingo card/paper manufactured by the manufacturer.

(18) Serial number. The unique identification number assigned by the manufacturer to a specific product line of bingo card/paper.

(19) Series number. The specific number assigned by the manufacturer that identifies the unique configuration of numbers that appears on an individual bingo card/paper face.

(20) Sheet. A single piece of paper that contains one or more disposable bingo card/paper faces.

(21) Shutter card. A device made of cardboard or other suitable material with plastic "shutters" that cover a number to simulate the number being daubed.

(22) UP. The number of sheets of disposable bingo paper glued together by the manufacturer. The number of sheets normally precedes this term.

(23) UPS pads. A bound collection of disposable bingo card/paper where each sheet in the collection is used to play a separate bingo game during the occasion.

(b) Approval of bingo card/paper.

(1) Bingo card/paper shall not be sold in the state of Texas, nor furnished to any person in this state, nor used for play in this state until the manufacturer of the bingo card/paper has received written approval for use within the state of Texas by the Commission. The manufacturer at its own expense must present the bingo card/paper to the Commission for approval.

(2) A letter of introduction including the style of play must be presented to Commission headquarters for review. The manufacturer must submit one complete color positive or sample for each type of bingo card/paper. The color positive or sample may be submitted in an electronic format prescribed by the Commission in lieu of the hardcopy submission. The color positive or sample bingo card/paper must:

(A) bear on the face of every disposable bingo card/paper used, sold, or furnished in this state an impression of the State of Texas and a star of five points encircled by olive and live oak branches and the words "Texas Lottery Commission," in accordance with detailed specification, available on request from the Commission. The face of each disposable bingo card/paper must also have printed on it in a conspicuous location the name of the manufacturer or trademark, which has been filed with the Commission; and

(B) contain the serial and series numbers assigned by the manufacturer on the face of each of the bingo card/paper, except in the case of Break-open bingo, which may contain the serial number assigned by the manufacturer on the outside so as not to be concealed.

(3) The bingo card/paper may contain numbers or symbols so long as the numbers or symbols preserve the integrity of the Commission. The Commission will not approve any bingo paper that displays images or text that could be interpreted as depicting alcoholic beverages, violent acts, weapons, profane language, provocative, explicit or derogatory images or text. All images or text are subject to final approval by the Commission.

(4) If the bingo card/paper is approved the manufacturer will be notified of the approval. This approval only extends to the specific bingo card/paper submitted and will be cited in the Commission's approval letter. If the bingo card/paper is modified in any way, with the exception of the color, series number, and/or serial number it must be resubmitted to the Commission for approval.

(5) The Commission may require resubmission of an approved bingo card/paper at any time.

(6) If an approved bingo card/paper is discontinued or no longer manufactured for sale in Texas, the manufacturer must provide the Commission written notification within ten days of discontinuance or cessation of manufacturing for sale in Texas. The written notification may be sent to the Commission via facsimile, e-mail, delivery services or postal delivery.

(1) After inspection of the bingo card/paper by the Commission, if the bingo card/paper does not comply with the provisions of this rule and/or the Bingo Enabling Act, the Commission shall disapprove the bingo card/paper and shall notify the manufacturer of the disapproval. Any bingo card/paper that is disapproved by the Commission may not be displayed, purchased or sold in the state of Texas. Disapproval of and prohibition to use, purchase, sell or otherwise distribute, is effective immediately upon notice to the manufacturer by the Commission.

(2) A manufacturer shall not sell, or furnish unapproved bingo card/paper to anyone, including another manufacturer or distributor for use in this state. A manufacturer shall not sell, or furnish bingo card/paper not bearing the seal of the Commission on the face of the bingo card/paper and the manufacturer's name or trademark to distributors for use in this state. This requirement also applies to any manufacturer who assembles bingo card/paper for sale in Texas.

(3) A licensed authorized organization shall not purchase, obtain, or use disapproved bingo card/paper in this state.

(4) If the manufacturer modifies the bingo card/paper that was previously disapproved, the manufacturer may resubmit the modified bingo card/paper for Commission approval. At any time the manufacturer may withdraw any disapproved bingo card/paper from further consideration.

(5) The Commission may disapprove the bingo card/paper at any stage of review. The disapproval of the bingo card/paper is administratively final.

(d) Manufacturing requirements.

(1) Bingo card/paper must comply with the following construction standards.

(A) The disposable paper used shall be of sufficient weight and quality to allow for clearly readable numbers and to prevent ink from spreading or bleeding through an UPS pad thereby obscuring other numbers or bingo card/paper;

(B) series numbers may be displayed in the center square of the bingo card/paper;

(D) a manufacturer shall not repeat a serial number on or in the same product line, series, and color of bingo card/paper within one year of the last printing of that serial number.

(2) UPS pad must comply with the following construction standards.

(A) Bingo card/paper in UPS pads must only be glued and not stapled; and

(B) the disposable bingo card/paper assembled into UPS pads shall not be separated, with the exception of the multi-part disposable bingo card/paper, nor shall single sheets already manufactured be cut for sale for special bingo games.

(3) Inspection. The Commission, its authorized representative or designee may examine and inspect any individual bingo card/paper or series of bingo card/paper and may pull all remaining bingo card/paper in the inventory if the Commission, its authorized representative or designee determines that the bingo card/paper is defective or has not been approved.

(4) Packaging.

(A) Bingo card/paper shall be sealed in shrink wrap and be designed so that if the shrink wrapped bingo card/paper, package, or case was opened or tampered with, it would be easily noticed.

(B) Barcodes may be included on each bingo card/paper, package, or case provided the barcode contains information required in subparagraph (C).

(C) A label shall be placed on, or be visible from, the exterior of each package or case of bingo card/paper listing the following information:

(i) Type of product;

(ii) Series number of the UPS pads and/or sheet(s);

(iii) Serial numbers of the top sheet of the UPS pads and/or sheet(s);

(iv) Number of package or cases; and

(v) Cut and color of paper.

(D) A packing slip shall be included with the package or case listing the following information:

(i) Type of product;

(ii) Number of UPS pads or sheets;

(iii) Series number of the UPS pads and/or sheet(s);

(iv) Serial numbers of the top sheet of the UPS pads and/or sheet(s);

(v) Number of package or cases; and

(vi) Cut and color of paper.

(e) Records.

(1) Manufacturers and distributors must provide the following information on each invoice and other documents used in connection with a sale, return or any other type of transfer of bingo card/paper:

(A) Date of sale;

(B) Quantity sold and number of faces per sheet;

(D) Name and address of the purchaser; and

(E) Texas taxpayer identification number of the purchaser.

(2) Manufacturers and distributors must maintain standard accounting records that include but are not limited to:

(A) Sales invoice;

(B) Credit memos;

(D) Purchase records.

(3) Licensed authorized organization.

(A) A licensed authorized organization must maintain a disposable bingo card/paper sales summary showing the organization's name, taxpayer number, distributor's taxpayer number, invoice date, distributor's name, invoice number, serial number, and series number. Also, the disposable bingo card/paper sales summary must include the number of faces (ON), number of sheets (UP), and color of borders.

(B) A licensed authorized organization must show the date of the occasion on which the disposable bingo card/paper was sold, a beginning inventory, along with the number of disposable bingo card/paper sold.

(D) Disposable bingo card/paper marked for destruction cannot be destroyed until witnessed by the Commission, its authorized representative or designee. All destruction documentation must be retained by the licensed organization for a period of four years from the date of destruction.

(4) All records identified in this subsection must be retained for a period of four years from creation of the records.

(f) Braille cards. Visually impaired, legally blind, or persons with disabilities may use their own personal Braille cards when the authorized organization does not provide Braille Cards. Players using Braille cards shall pay the equivalent price to participate in the game. The authorized organization shall have the right to inspect, and to reject any personal Braille card(s). Braille cards are not required to be approved by the Commission. Braille cards are not considered bingo equipment as defined by Occupations Code, §2001.002(5).

(g) Loteria. The symbols or pictures may be identified with Spanish subtitles and each of the 54 cards contains a separate and distinct symbol or picture. The 54 individual cards may be shuffled by the caller and then randomly drawn and announced to the players. The player uses a loteria card, which contains a minimum of sixteen squares and each square has one of the 54 symbols or pictures. There are no duplicate symbols or pictures on the loteria card. Loteria cards are not considered bingo equipment as defined by Occupations Code, §2001.002(5).

(h) Style of play and minimum standards of play. Prizes awarded on any style of play must be in accordance with Occupations Code, §2001.420.

(1) Player pick ems. A game of bingo where a player selects his/her own numbers on a multi-part duplicated disposable bingo card/paper. One copy is retained by the player and used as a bingo card/paper while the other copy is provided to the organization for verification purposes.

(2) Progressive bingo. A game of bingo that either the established prize amount or number of bingo balls and/or objects may be increased from one session to the next scheduled session. If no player completes the required pattern within the specified number of bingo balls or objects drawn, the established prize amount may be increased but shall not exceed the prize amount authorized by the Bingo Enabling Act.

(3) Warm-up or early bird. A bingo game conducted at the beginning of a bingo occasion during the authorized organization's license times, in which prizes are awarded based upon a percentage of the sum of money received from the sale of the warm-up/early bird bingo card/paper.

(4) Shaded/Images bingo. Bingo card/paper that incorporates images where one or more squares on a bingo card/paper face are shaded. Each shaded image conforms to a pattern that must be achieved to win a bingo game or each shaded square may be used as a free space or a pattern for a bingo game.

(5) Bingo bonus number(s). A bingo game that has additional identified number(s) in excess of the 24 numbers that appear on the bingo card/paper face that, when called, could result in an additional prize awarded. The first player who matches the numbers shown on the bonus number(s) line within the specified number(s) called wins the additional prize.

(6) Multi level or multi tier. Bingo card/paper that has one or more additional lines of number(s) aside from the normal five lines that when played could result in an additional prize. Therefore, a multi level or multi tiered game could be played on this bingo card/paper that provides more opportunities to win.

(7) Multi color bingo. A bingo game played on a bingo card/paper with a different color for each bingo card/paper face. Prizes are awarded based on the color on which the bingo card/paper face that had the bingo.

(8) Pre-called. A game of bingo where the numbers for the game have been pre-called and identified prior to the start of the game.

(9) Double number. A bingo game played on a bingo card/paper that has two numbers per square. A player has two chances to daub each square.

(10) Break-open bingo. A type of bingo game played on sealed disposable bingo card/paper, where the bingo card/paper face is concealed, that may be folded, and where the bingo game has been pre-called. The bingo game may not be pre-called prior to the authorized organization's license time.

(11) Regular bingo. A bingo game played on the standard card face of five rows by five columns with 24 pre-printed numbers between 1 and 75, symbols, or blank squares and a free space square where the winner is determined by a predetermined pattern.

(i) Promotional bingo. This rule shall not apply to bingo card/paper furnished for use in a promotional bingo game conducted in accordance the Occupations Code, §2001.551. The card/paper may not contain the Commission seal.

(j) Exempt organization. This rule shall not apply to bingo card/paper furnished for use by an organization receiving an exemption from bingo licensing in accordance with the Occupations Code, §§2001.551(b)(3)(A) and (B). The bingo card/paper may not contain the Commission seal.

(k) House rules. A licensed authorized organization playing a style of bingo other than regular bingo must develop house rules on how the game is played. The house rules must be made available to the public.

(l) Card-minding devices. This rule shall be applicable only to bingo card/paper made of paper, cardboard or similar material approved by the Commission and shall not be applicable to the manufacture or use of card-minding devices addressed in §402.302, with the exception of style of play as defined by this rule and approved by the Commission.

§402.302.Card-Minding Systems.

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

(1) 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.

(2) 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, §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.

(3) 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.

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

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

(6) 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.

(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) 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.

(9) 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.

(10) Software modifications. Alterations to the proprietary software that affects the requirements or restrictions as identified in this rule or the Bingo Enabling Act while not making substantial changes that affect the previously approved device's proprietary software or hardware platforms.

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

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

(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)(5) 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)(5) 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)(5) 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 Bingo Enabling Act and the 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, Texas 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, Texas 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 Bingo Enabling Act and the 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 Charitable Bingo Operations 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 the Bingo Enabling Act 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 12 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 paragraph (3) of this subsection 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 12 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 12 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 paragraph (1) of this subsection 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 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.

(2) 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 of four years:

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

(B) number 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 of four years:

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

(B) number 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.

(4) 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.

(5) 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.

§402.303.Pull-tab or Instant Bingo Dispensers.

(a) Approval of Pull-tab or Instant Bingo Dispensers.

(1) No pull-tab or instant bingo dispenser may be sold, leased, or otherwise furnished to any person in this state or used in the conduct of bingo for public play unless and until a dispenser which is identical to the dispenser 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.

(2) An identical dispenser to the dispenser intended to be sold, leased, or otherwise furnished must be presented to the Commission in Austin, Texas for review. If granted, approval extends only to the specific dispenser model approved. Any modification must be approved by the Commission.

(3) Once a dispenser has been approved, the Commission may keep the dispenser for further testing and evaluation for as long as the Commission deems necessary.

(b) Manufacturing requirements.

(1) Manufacturers of pull-tab or instant bingo dispensers must manufacture each dispenser in such a manner to ensure that the dispenser dispenses a break-open bingo ticket, an instant bingo ticket, a pull-tab bingo game or instant bingo card only after the player inserts money into the dispenser, and that such ticket, game or card is the sole thing of value which may be redeemed for cash.

(2) Manufacturers of dispensers must manufacture each dispenser in such a manner to ensure that the device neither displays nor has the capability to determine whether a break-open bingo ticket, an instant bingo ticket, or a pull-tab bingo game is a winning or non-winning ticket.

(3) Manufacturers of dispensers must manufacture each dispenser in such a manner that any visual animation does not simulate or display rolling or spinning reels.

(4) Manufacturers of dispensers must manufacture each dispenser in such a manner that any stacking column is adjustable for varying lengths of break-open bingo tickets, instant bingo tickets, or pull-tab bingo games. As an option, a dispenser may use replaceable stacking columns that accommodate varying lengths of break-open bingo tickets, instant bingo tickets, or pull-tab bingo games. The dispenser must be adjustable for varying thicknesses of break-open tickets, instant bingo tickets, or pull-tab bingo games.

(5) If the Commission detects or discovers any problem with the dispenser that affects the security and/or integrity of the break-open bingo ticket, an instant bingo ticket, or a pull-tab bingo game or dispenser, the Commission may direct the manufacturer, distributor, or conductor to cease the sale, lease, or use of the dispenser, as applicable. The Commission may require the manufacturer to correct the defect, malfunction, or problem or recall the dispenser immediately upon notification by the Commission to the manufacturer. If the manufacturer, distributor, or conductor detects or discovers any defect, malfunction, or problem with the dispenser, the manufacturer, distributor, or conductor, as applicable, shall immediately remove the dispenser from use or play and immediately notify the Commission of such action.

(6) 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 pull-tab or instant bingo dispenser in such a manner that it is conspicuous and clearly visible to a player using the device.

(1) A conductor who has purchased or leased a dispenser may not allow another conductor to use such dispenser unless and until the former conductor has removed its break-open bingo tickets, instant bingo tickets, pull-tab bingo games and instant bingo cards from the dispenser.

(2) Each conductor who uses a dispenser at its bingo occasion shall affix to the dispenser an identification label which displays the conductor's name and Texas taxpayer identification number.

(3) The keys to open the locked doors to the dispenser's ticket dispensing area and coin and/or cash box must be in the possession and control of the operator in charge of the occasion, or someone designated by the operator. The operator in charge or the person designated shall present the keys to a Commission representative immediately upon request. The operator in charge shall be responsible for ensuring that the person so designated shall have the keys available at all times during the occasion.

(4) The entire deal or package shall be offered for sale, except as otherwise provided by §402.300(d)(5) of this chapter. All break-open bingo tickets, instant bingo tickets, pull-tab bingo games or instant bingo cards in any one column or sleeve must have the same serial number, color description, and must be of the same kind and type.

(d) Inspection. The Commission or the Commission's authorized representative(s) may examine and inspect any individual pull-tab or instant bingo dispenser. Such examination and inspection includes immediate access to the dispenser and unlimited inspection of all parts of the dispenser.

(e) Records.

(1) Each manufacturer selling pull-tab or instant bingo dispensers must maintain a log showing the date, model, and serial number of the purchased dispenser and to whom the dispenser was sold.

(2) Each distributor selling, leasing, or otherwise furnishing pull-tab or instant bingo dispensers must maintain a log showing the following information:

(A) the date, model and serial number of the dispenser;

(B) the name and Texas taxpayer identification number of the licensed organization to whom the pull-tab or instant bingo dispenser was furnished;

(C) name, address, and Texas taxpayer identification number of the manufacturer or distributor from whom the dispenser was purchased; and

(D) name, address, and Texas taxpayer identification number of the distributor to whom the dispenser was sold, leased, or otherwise furnished.

(3) Each conductor purchasing, leasing, or otherwise utilizing pull-tab or instant bingo dispensers must maintain a log showing the date, model, and serial number of the dispenser and the name, address, and Texas taxpayer identification number of the distributor from whom the dispenser was purchased, leased, or otherwise furnished. If multiple conductors hold an interest in a dispenser, each must maintain a separate record.

(4) All records, reports, and receipts relating to the pull-tab or instant bingo dispenser sales, maintenance, and repairs must be retained by the conductor on the premises where the conductor is licensed to conduct bingo or at a location designated in writing by the conductor for a period of four years for examination by the Commission. Any change in the designated location must be submitted to the Commission in writing at least ten days prior to the change.

(5) Manufacturers and distributors must provide and maintain for a period of four years the following information on each invoice or other document used in connection with a sale or lease, as applicable:

(A) date of sale or lease;

(B) quantity sold or leased;

(D) model and serial number of each dispenser;

(E) name and address of the purchaser or lessee; and

(F) Texas taxpayer identification number of the purchaser or lessee.

(f) Restrictions. No licensee may display, use or otherwise furnish a dispenser 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.

§402.304.System Service Provider.

(a) For purposes of this section, a system service provider is a person who provides an integrated electronic system for automated bingo services for the use by a licensed authorized organization. Such system will monitor and control all functions related to the registering, and accounting for bingo sales, prizes, inventory, prize fees, taxes, report generation, and other authorized services, as may be requested by the licensed authorized organization.

(b) An applicant for a license must file with the Commission a verified written application on a form prescribed by the Commission which must include:

(1) The name and address of the applicant;

(2) If a noncorporate entity, the name and address of each owner;

(3) If a corporation, the name and home address of each officer and director and each person owning 10% or more of any class of stock in the corporation;

(4) Information regarding whether the applicant or any person who is required to be named in the application has been convicted of a felony, criminal fraud, gambling, or gambling related offense, or a crime of moral turpitude;

(5) Information regarding whether the applicant or any person required to be named in the application is an owner, officer, director, shareholder, agency or employee of a commercial lessor licensed under this Act; and

(6) Any other information the Commission requests.

(1) The person has been convicted of a felony, criminal fraud, a gambling offense, a gambling related offense, or a crime of moral turpitude and it has been less than ten years since the termination of the sentence, parole, or probation related to the offense; or

(2) The person is an owner, officer, director, or employee of a holder of a commercial lessor licensed under this Act.

(d) The fee for a system service provider license is $1,000 plus any cost incurred to conduct the criminal background checks.

(e) A system service provider shall not hold another license issued by the Commission.

(f) A license for a system service provider shall be revoked if within the license period any disqualifications under this rule or the Texas Bingo Enabling Act occur.

(g) A system service provider is subject to the same licensing provisions for manufacturers and distributors as stated in the Texas Bingo Enabling Act, §§2001.201 and 2001.203.

(h) The Commission at any time may inspect the system service provider's services and premises. The system service provider shall provide any information requested by the Commission in a timely manner.

(i) No automated bingo services or system may be sold, leased, or otherwise furnished to a licensed authorized organization unless and until an automated bingo service or system identical to the service or system intended to be sold, leased, or otherwise furnished has been presented to the Commission by the system service provider, at the system service provider's expense, and has been approved by the Commission for use within the state.

(j) If approved by the Commission, such approval extends only to the specific hardware, software and related equipment inspected and tested. Any changes made in or to the hardware, software and related equipment must be presented to the Commission for approval prior to selling or supplying such equipment or service to a licensed authorized organization.

(k) Once an automated bingo service or system has been approved, the Commission may keep the automated bingo service or system for further testing and evaluation for as long as the Commission deems necessary.

(l) Persons providing computerized bookkeeping or accounting services to licensed authorized organizations are exempt from the licensing requirements of this rule if only:

(1) Generalized, commercially available computer hardware is utilized;

(2) Generalized, commercially available software is utilized; and

(3) Any automated equipment utilized is not for the purpose of monitoring, networking, integrating, or controlling the operation of any automated equipment utilized by the licensed authorized organization.

(m) Each licensed system service provider shall file a quarterly report on a form prescribed by the Commission, reflecting the information contained in this rule. At the discretion of the Commission, the quarterly report may be filed via electronic means.

(n) The report shall be filed with regard to each calendar quarter and is due on or before the last day of the month following each calendar quarter.

(o) The report shall contain the name and 11-digit taxpayer identification number of each licensed authorized organization receiving automated bingo services from the system service provider and the amount paid by the organization for said services. In the event the system service provider ceases to provide automated bingo services or systems to a licensed authorized organization, the date of such termination shall be noted on the report.

(p) The system service provider shall retain a copy of the quarterly report for at least four years after the date on which the return is filed. The reports shall be maintained at the system service provider's principle business location as specified on the license application.

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 January 7, 2005.

TRD-200500075

Kimberly L. Kiplin

General Counsel

Texas Lottery Commission

Earliest possible date of adoption: February 20, 2005

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

Subchapter D. LICENSING REQUIREMENTS

16 TAC §§402.400 - 402.407

The new sections are proposed pursuant to Occupations Code, §2001.054, which authorizes the Commission to adopt rules necessary to enforce and administer the Bingo Enabling Act.

Occupations Code, Chapter 2001 is affected by the proposed new sections.

§402.400.General Licensing Provisions.

(a) Any person who wants to engage in a bingo related activity shall apply to the Commission for a license. The application must be on a form prescribed by the Commission and all required information must be legible, correct and complete. An application is incomplete if the following information is not provided:

(1) All information requested on the application form and applicable schedules;

(2) All supplemental information requested during the pre-licensing investigation period;

(3) The applicable license fee;

(4) The required bond or other security, if applicable; and

(5) Authorized signatures as required by the Commission.

(b) Information submitted by an applicant in the form of an applicable schedule shall be considered to be part of the application. Supplemental information should be submitted on a form prescribed by the Commission and all information required must be correct and complete.

(c) Information submitted by an applicant in a format other than an applicable schedule must be legible and must include the following:

(1) the name and address of the organization as it appears on the application;

(2) the Texas taxpayer identification number; or, if sole owner, the individual's social security number;

(3) a statement identifying the information submitted;

(4) the signature, printed name and telephone number of the person authorized to submit the information; and

(5) All supplemental information requested during the pre-licensing investigation period.

(d) Within 14 days after the Commission has received the application, the Commission will review the application and;

(1) notify the applicant if additional information is required;

(2) notify the applicant in writing why the application is being denied; or

(3) issue the license.

(e) If an application is incomplete, the Commission will notify the applicant. The applicant must provide the requested information within 14 days of such notification. Failure to provide the requested information within the 14 day time line will result in the denial of the license application.

(f) Notwithstanding the provisions of subsection (e) of this section, failure to submit all required information within 45 days from the date the application is received by the Commission will result in the denial of the application.

(g) Prior to the issuance of a license, the Commission may require an applicant to attend a pre-licensing interview. The Commission will identify the person or persons for the applicant who must attend the pre-licensing interview. The pre-licensing interview will consist of, at a minimum, the following:

(1) review of the Bingo Enabling Act;

(2) review of the Charitable Bingo Administrative Rules;

(3) licensee responsibilities;

(4) process pertaining to the different types of license application;

(5) bookkeeping and record keeping requirements as it involves bingo; and

(6) a statement from the person or persons attending the pre-licensing interview that they understand and the licensee will comply with the provisions of the Bingo Enabling Act and Charitable Bingo Administrative Rules.

(h) The Commission may deny an application based on information obtained that indicates non-compliance with the provisions of the Bingo Enabling Act and/or the Charitable Bingo Administrative Rules in connection with a pre-licensing interview and/or location inspection.

(i) Each licensed organization and organization issued a temporary authorization is required to file timely and complete required reports, as applicable to the type of current license held.

(j) An organization may withdraw an application at any time. Once the written request for withdrawal is received by the Commission, all processing of the application will cease and the withdrawal is considered final. If the organization wants to reapply for a license, a complete new application is required.

(k) Voluntary surrender of a license. A licensee may surrender its license for cancellation provided it has completed and submitted to the Commission the "Notice of Surrender of Bingo License". The cancellation of the license shall be final and effective upon receipt by the Charitable Bingo Operations Division of a copy of the resolution, or other authoritative statement of the licensee, requesting cancellation of the license and providing a requested effective date. The cancellation is effective as of the date identified in the letter. If no date is identified in the letter, the effective date shall be the date the Commission receives the letter. Notwithstanding cancellation of the license, the licensee must file all reports, returns and remittances required by law. The licensee shall surrender the license to the Commission on the effective date of the surrender. The Commission will send the licensee a letter confirming the surrender and resulting cancellation of the license.

(l) Administrative Hold. A licensee may place its license in administrative hold. The placement of a license in administrative hold shall be effective upon receipt by the Commission of a copy of the resolution, or other authoritative statement of the licensee, requesting administrative hold and citing a requested effective date. The licensee shall submit the license to the Commission on the effective date of the placement of the license in administrative hold. Once the license has been placed in administrative hold, all bingo activity (i.e. leasing, conducting bingo) must cease until the licensee files an amendment and the amended license is issued by the Commission and received by the licensee.

(m) Notwithstanding placement of the license in administrative hold, the licensee must file all reports, returns and remittances required by law. The licensee must also file a timely and complete application for renewal of the license each time the license is ripe for renewal.

(n) Each person required to be named in an application for license under the Bingo Enabling Act will have a criminal record history inquiry at state and/or national level conducted. Such inquiry may require submission of fingerprint card(s). FBI fingerprint cards are required for an individual listed in an application for a distributor, system service provider, or manufacturer's license and for an individual listed on an application who is not a Texas resident.

(o) Timely Renewal of License.

(1) An annual bingo license expires one calendar year from date of issuance.

(2) Each licensee is solely responsible for the timely renewal of its annual license.

(3) Failure of the licensee to receive the renewal notice(s) mailed by the Commission is not a mitigating circumstance in timely renewal. The renewal notice is merely a reminder and not a prerequisite to a licensee's ability to submit a renewal application.

(4) A licensee that has not submitted a renewal application timely must cease all bingo activity until properly licensed.

(5) Notwithstanding any other provision in the Charitable Bingo Administrative Rules, to be considered timely, the renewal application must be filed with the Commission no later than the license expiration date. A licensee may mail the renewal application but the postmark must clearly show a date that is no later than the license expiration date. To be timely filed, the Commission must receive the mailed application within seven days of the postmarked date of the mailed application and the postmarked date must clearly show a date that is no later than the license expiration date. Additionally, if the Commission does not receive the renewal application within seven days of the postmarked date of the mailed application, the renewal application is not timely filed. In computing the period of time for filing renewal applications, the last day of the period so computed is to be included, unless it is a Saturday, Sunday, or legal holiday, in which event the period runs until the end of the next day which is not a Saturday, Sunday, or legal holiday.

(p) Notification of changes. Each licensee must promptly notify the Commission in writing within ten working days of any change to information contained in a filed application regardless of whether the cause of the change is because information filed with the Commission has become inaccurate, or additions or deletions are necessary to reflect changes in the circumstances of the licensee. Examples of such changes may include the names of the organizational officers, the amount of rent charged for leased premises, the name of a member responsible for the conduct of games, or the name of an individual connected with a commercial lessor that would affect its eligibility to hold a license and, in the case of lessors, the name of a new authorized organization that intends to lease premises from it for the purpose of conducting bingo.

(q) Representation; personal receipt of documents. For purposes of this subsection, an individual shall be recognized by the Commission as an applicant or licensee's authorized representative only if the applicant or licensee has filed with the Commission a form prescribed by the Commission identifying the individuals currently listed as directors, officers, or operators, or if they are identified on the completed form "Schedule E Authorization of Representation". A person is not an authorized representative of the applicant or licensee unless specifically named on a form prescribed by the Commission as part of the application, or in the "Schedule E Authorization of Representation" that is on file with the Commission. Only those persons specifically named on a form prescribed by the Commission or in the "Schedule E Authorization of Representation" as an authorized representative shall be recognized by the Commission concerning any matter relating to the licensing process or license. Only the applicant or licensee or its authorized representative may receive from the Commission documents relating to the application or license without being required to submit a request under the Public Information Act.

§402.401.Temporary License.

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

(1) Bingo liability--Includes, but is not limited to, prize fee, penalty, interest, or administrative penalty.

(2) Fee credit--An overpayment of a license fee.

(3) Fee refund--A return of money to a person who has a fee credit.

(4) Regular license--A license to conduct bingo that is effective for a period of one year or two years unless revoked or suspended by the Commission. A regular license may be referred to as an annual license.

(5) Temporary license--A license to conduct bingo that is in effect for a single bingo occasion.

(b) General.

(1) Requirements. The Commission may not issue a temporary license if the applicant has failed to file a required report, failed to pay a prize fee, penalty or interest, or has not distributed the proceeds calculated on the quarterly report for a charitable purpose.

(2) Duration. A temporary license is valid for no more than four consecutive hours during any 24-hour period.

(3) Display. The licensed authorized organization must conspicuously display during a temporary bingo occasion at the licensed bingo premises a temporary license, and, if applicable, verification of notification as referred to in subsection (d)(5)(E) of this section.

(4) Occasion not held. If a licensed temporary occasion is not held, within ten days of the scheduled occasion, an organization may submit a written request for a new playing date or for a refund or credit. The request must contain the following:

(A) an explanation of why the licensed temporary occasion was not held, and

(B) a specified new date for the temporary occasion or,

(5) Voluntary surrender of regular license.

(A) If a licensed authorized organization that has one or more temporary licenses with a stated date and time voluntarily surrenders its regular license, the licensed authorized organization may conduct any remaining designated temporary occasions so long as the total number of occasions does not exceed six per calendar year. If over six previously specified occasions remain, the licensed authorized organization must provide to the Commission written notification of no more than six of the dates of the temporary licenses that will be utilized. This notification must be provided within ten days of surrender of the license. Otherwise, the Commission will cancel all temporary occasions that were specified on the temporary licenses and will refund the fees of the unused licenses or apply them to any outstanding bingo liabilities of the organization pursuant to §402.404 of this chapter.

(B) If the Commission denies or revokes a regular license by final and unappealable order, any temporary license held by the regular license holder that stated the specific date and time of any bingo occasion will likewise be denied or revoked and monies refunded or applied to outstanding bingo liabilities pursuant to §402.404 of this chapter.

(C) If the Commission denies or revokes a regular license by final and unappealable order or a license holder voluntarily surrenders a regular license, the license holder may not utilize any temporary license that does not have the date or time of a bingo occasion stated.

(6) All records that are required to be maintained under a regular license must be maintained for a temporary bingo license.

(1) If a licensed authorized organization that does not hold a regular license conducts bingo under a temporary license at a licensed bingo premises, no more than three bingo occasions may be conducted at that premises on a given day.

(2) The playing time of a temporary bingo occasion may not conflict with the playing time of any other license at the bingo premises on that date unless otherwise provided by law.

(d) Regular license holder.

(1) A regular license holder must apply for a temporary license at least seven working days prior to the bingo occasion.

(2) A regular license holder may submit an application for a temporary license by fax only if the organization has a sufficient temporary license fee amount in their temporary license fee account with the Commission to cover the total number of temporary occasions requested.

(3) Quarterly reports filed by a regular license holder must include proceeds from all licensed temporary occasions held during the quarter.

(4) There may be no more than three occasions per day conducted by no more than two licensed, authorized organizations.

(5) The Commission may issue a temporary license to a regular license holder without listing the specific date or time of a bingo occasion. However, the temporary bingo occasion must be conducted at the same location and with the same primary operator as shown on the organization's regular license.

(A) Application. To receive a temporary license without a specific date or time designated, a regular license holder must submit an application on the prescribed form that indicates the total number of temporary licenses requested for the license period. In addition, the regular license holder must provide the total amount of license fees for all temporary licenses requested.

(B) Notification. An authorized organization that has a temporary license that does not state the date or time for its use must notify the Commission by submitting notification on a form prescribed by the Commission.

(C) Expiration. The playing date or time for a temporary license issued without the specific date or time identified must be prior to the expiration date of the annual license in effect at the time the temporary license application was filed.

(D) Credit or refund. The Commission will not credit or refund a temporary license fee when an organization fails to timely notify the Commission of the playing date and time prior to the expiration of the annual license that was in effect when the temporary license was issued.

(E) Verification. The verification of receipt of notification must be posted adjacent to the applicable temporary license during the bingo occasion.

(6) In accordance with Occupations Code, §2001.108(e), the Commission may issue to a regular license holder additional temporary licenses in excess of the number of temporary licenses specified under Occupations Code, §2001.103(e) if the following conditions are met:

(A) The regular license holder submits a completed application on the form prescribed by the Commission; and

(B) The date and times stated on the application are consistent with the day and times licensed to the organization that has ceased or will cease to conduct bingo as provided in Occupations Code, §2001.108.

(7) If the organization is issued the amendment license filed under Occupations Code, §2001.108 prior to being issued the temporary license, the temporary license application shall be discontinued, and any license fees submitted will be credited to the organization's temporary license fee account.

(e) Non-regular license holder.

(1) Application. A non-regular license holder that wishes to conduct a bingo occasion must file a complete application for a temporary license on a form prescribed by the Commission at least 30 working days prior to the first bingo occasion to be played under the temporary license. If 12 months have elapsed since the organization last filed a temporary license application with the Commission, the organization must submit with their application a list of all officers, directors, operators, and workers for the organization on a form prescribed by the Commission.

(2) Proceeds distribution. All net proceeds reported on the quarterly report must be distributed for a charitable purpose in the quarter the funds are accrued unless the funds are distributed to a charitable purpose and reported to the Commission in the immediately subsequent quarter.

§402.402.Registry of Bingo Workers.

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

(1) Caller--an individual who operates the bingo ball selection device and announces the balls selected.

(2) Cashier--an individual who sells and records bingo card and pull tab sales to bingo players and/or pays winners the appropriate prize.

(3) Manager--an individual who oversees the day-to-day operation of the bingo premises.

(4) Operator--means an active bona fide member of a licensed authorized organization that has been designated on a form prescribed by the Commission prior to acting in the capacity as the organization's primary operator. An individual designated by an authorized organization as an "alternate operator" shall perform all the duties and responsibilities of an operator in the absence of the primary operator.

(5) Sales Person--an individual who monitors bingo players, sells bingo cards and pull tabs, verifies winners and/or awarding prizes. A sales person may be referred to as a floor worker, runner or usher.

(b) Who must be listed on the Registry of Approved Bingo Workers. The following persons must be listed on the Registry of Approved Bingo Workers prior to being involved in the conduct of bingo:

(c) Each individual must submit a completed Texas Application for Registry of Approved Bingo Workers as prescribed by the Commission to remain on the Registry of Approved Bingo Workers.

(d) The registrant will be added to the registry as soon as possible after the Commission has determined that the person is eligible to be involved in the conduct of bingo or act as an operator.

(e) For purposes of the Registry of Approved Bingo Workers, each operator must be designated on the licensed authorized organization's license to conduct bingo application pursuant to the Occupations Code, §2001.102(10) as the member who will be responsible for the conduct of bingo under the terms of the license and the Bingo Enabling Act. An individual included on the registry may not serve as the primary operator for an organization until the approved license to conduct bingo has been issued to the licensed organization listing the individual as the operator, received by the organization, and displayed at the location. An organization must submit a registered operator on a form prescribed by the Commission prior to the operator acting in the capacity of primary operator.

(f) Expiration of listing on registry of approved bingo workers. A registrant's listing on the registry is valid for three years from the last date of inclusion on the registry, unless the individual's listing is removed for cause prior to the expiration of three years. Every three years after the date the person's name is listed on the registry the individual shall submit a form prescribed by the Commission stating the person's intent to remain on the registry. Failure to timely submit the prescribed form will result in the deletion of the worker's name from the registry. A person whose name is deleted from the registry due to failure to verify the intent to remain on the registry may be re-listed on the registry by filing the required form.

(g) How to be listed on the Registry of Approved Bingo Workers. For a person to be listed on the Registry of Approved Bingo Workers, a person must:

(1) complete a Texas Application for Registry of Approved Bingo Workers form as prescribed by the Commission;

(2) submit the required fee for the cost of the card or form; and

(3) be determined by the Commission to not be ineligible under Occupations Code, §2001.105(a)(6).

(h) An individual listed on the registry must notify the Commission of any changes to information contained on the Texas Application for Registry of Approved Bingo Workers on file with the Commission within 30 days of the change in information. Such notification shall be in writing or other approved electronic means.

(i) Identification Card for Approved Bingo Worker.

(1) The Commission will issue an identification card indicating that the person is listed in the registry. A registered worker and operator must wear his/her identification card while on duty.

(2) The identification card worn by the registered worker or operator while on duty must be visible. The identification card shall list the individual's name and unique registration number, as issued by the Commission. An individual may obtain the unique registration number from the Registry of Approved Bingo Workers on the Commission's website or by requesting the number from the Commission.

(3) An identification card is not transferable and may be worn only by the individual identified on the card.

(4) Upon request by a Commission employee, a person described in subsection (a) of this section shall present personal photo identification in order to verify the identification card is that person's card.

(j) How to Obtain Approved Identification Cards.

(1) A completed identification card may be obtained from the Commission by submitting the required fee and submitting the required form.

(2) The fee for an identification card or identification card form may not exceed $5.00.

(3) A person who has been approved to work in charitable bingo may complete an identification card form provided by the Commission for use while on duty. Blank identification card forms may be obtained from the Commission. The person requesting the identification card form(s) must submit the required fee and the required form for the blank identification card form.

(4) The identification card prepared by the individual may only be on a prescribed Commission card form and must be legible and include the individual's name and registration number.

(k) A licensed authorized organization which is reporting conduct where there is a substantial basis for believing that the conduct would constitute grounds for removal or refusal to list on the registry shall make the report in writing to: Bingo Registry, Texas Lottery Commission, P.O. Box 16630, Austin, Texas 78761-6630.

(l) The provisions of the Occupations Code, §2001.313 related to the registry of bingo workers do not apply to an authorized organization that does not have an annual license to conduct bingo who receives a temporary license to conduct bingo.

(m) If the Commission proposes to refuse to add or proposes to remove the person from the Registry of Approved Bingo Workers consistent with Occupations Code, §2001.313, the Commission will give notice of the proposed action as provided by Government Code, Chapter 2001.

§402.403.Licenses for Conduct of Bingo Occasions and to Lease Bingo Premises.

(a) License for Conduct of Bingo.

(1) License fee. An application for a license to conduct bingo must be accompanied by a license fee. An organization must provide the required information, as part of its license application, so that the applicant can calculate the amount of license fee that must accompany the application.

(2) A conductor may hold only one annual license to conduct bingo occasions. The license is valid for only the specific location indicated on the face of the license.

(3) Except for an occasion conducted under a temporary license, a licensed authorized organization must conduct regular bingo to be eligible to sell pull-tab bingo tickets.

(4) An organization applying to conduct bingo occasions at premises other than those used by it for its general activities shall submit with its application a certified copy of the minutes of the governing board of the local unit of the applicant that reflect the governing board's vote to conduct bingo occasions at a location other than the premises used by the organization for its general activities. If the articles of incorporation, by-laws, or other organizing instrument of the applicant requires approval by one or more of the state, national, or other higher governing bodies of the organization for the local unit to conduct any of its activities at a separate location, the applicant shall also submit certified copies of the documents that reflect the required approval by those governing bodies.

(5) Each applicant for a license to conduct bingo occasions must demonstrate that it is organized and operated primarily for purposes other than the operation of bingo activities.

(b) License to lease bingo premises.

(1) Fee. An application for a license to lease bingo premises must be accompanied by a license fee. The license fee is based upon the estimated annual gross rentals from licensed organizations that will conduct bingo at the location designated in the application for a license to lease bingo premises. For the purpose of this rule, "gross rentals from licensed organizations" means the total amount of rent owed by the licensed organizations, including, but not limited to, building rentals, payments for utilities, fixtures, security services, etc. The fee that must accompany the application is determined by Occupations Code, §2001.158(a).

(2) License.

(A) Each location to be leased as a bingo premises must be separately licensed pursuant to separate applications.

(B) Except as required by Occupations Code, §2001.152(a), the Commission may not issue more than one license to lease bingo premises for any one location.

(C) When more organizations apply to play bingo on a premises of a commercial lessor than can be licensed for the premises, the Commission will process only the number of applications for which there are openings with the commercial lessor. The Commission will process the applications in the order in which they are received. Additional applications in excess of the number that may be licensed for the commercial lessor's premises will be denied.

(1) An authorized organization that does not have an annual license to conduct bingo and intends to conduct bingo occasions must apply to the Commission for a temporary license on a form prescribed. The complete application, including all required schedules must be filed with the Commission at least 30 working days in advance of the first bingo occasion to be played under the temporary license. An organization that has an annual license to conduct bingo shall apply at least seven working days in advance of the occasion to be played under the temporary license, provided that the only proposed change is the date, time and/or location.

(2) Fee. An application for a temporary license to conduct bingo occasions must be accompanied by a $25 license fee. A licensed organization that is applying for a temporary license shall pay the $25 license fee from its bingo bank account. An organization may submit additional funds that can be applied to license fees in connection with future license applications.

(3) Licensed Temporary Occasions Not Held. If a licensed temporary occasion is not held, an organization shall submit to the Commission within ten days of the original temporary license date, the following:

(A) the original temporary license or letter of authority;

(B) a written explanation of why the licensed temporary occasion was not held; and

(4) A temporary license is valid for no more than four consecutive hours during any 24-hour period.

(d) License amendment. A licensee may not begin amended activities until:

(1) the application or notification of change is approved in writing by the Commission;

(2) the date of the change is effective; and

(3) the amended license or written notification from the Commission authorizing the change is received by the licensee and is displayed as required by the provisions of the Bingo Enabling Act during the conduct of bingo.

§402.404.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 the Bingo Enabling Act, 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 Charitable Bingo Operations 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 Charitable Bingo Operations 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 the Bingo Enabling Act;

(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 Charitable Bingo Operations 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 Charitable Bingo Operations 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 Charitable Bingo Operations 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 Charitable Bingo Operations 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 the Bingo Enabling Act to the State exist. A refund will not be issued until all liabilities to the State under the Bingo Enabling Act 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 Charitable Bingo Operations 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, §2001.104(a).

§402.405.Temporary Authorization.

(a) A temporary authorization shall be issued only to a person who is not licensed by the Commission but who has filed an original application.

(b) A temporary authorization to conduct a bingo-related activity may only be issued to a person who will conduct a bingo-related activity at the same location for which the person has a pending original application to conduct a bingo-related activity. A temporary authorization shall not be issued to a person if the proposed location to conduct bingo is not authorized under the provisions of the Bingo Enabling Act.

(c) A temporary authorization shall be issued for a stated period of time not to exceed 60 days. A temporary authorization may be extended upon written request by the person to whom the temporary authorization was issued. Such request must be filed with the Commission at least seven working days prior to the time the temporary authorization expires. Extensions shall be for a period of time not to exceed 60 days. No more than two extensions may be issued.

(d) A request for an extension shall include:

(1) the complete name of the organization requesting the extension;

(2) the Texas taxpayer identification number of the organization requesting the extension;

(3) a complete explanation of the basis for the request; and

(4) the specific reason(s) supporting the need for an extension.

(e) An organization who is not in compliance with the Bingo Enabling Act and/or the Charitable Bingo Administrative Rules will not be granted an extension unless the organization becomes compliant during the period of the original temporary authorization.

(f) An organization conducting bingo under a temporary authorization that desires to obtain a temporary license shall be subject to the same requirements in §402.403(c)(1) of this chapter regarding an organization not holding an annual license to conduct bingo.

(g) A temporary authorization is not a license.

(h) A temporary authorization may not be amended.

(i) An annual license that has been issued to an applicant shall expire one year from the date of the first issuance of any temporary authorization under this section.

§402.406.Exemptions from Licensing Requirements.

(a) Any group or organization that intends to conduct a game under Occupations Code, §2001.551, shall submit in writing to the Commission, the facts that support its exemption from the licensing requirements. If the organization or group is exempt, the Commission will issue a letter of exemption which must be available on the premises at all times during the conduct of bingo. The group or organization must notify the Commission within ten working days if there is any change in their status which may affect their eligibility for an exemption.

(b) An exemption issued by the Commission is valid for two years from the date of issuance. It is the responsibility of the group or organization holding the exemption to reapply in a timely manner.

(1) An organization conducting on behalf of persons 60 years of age or over shall submit a written request for an exemption describing the organization itself and who will be eligible to participate in the bingo games conducted by the organization, as per the eligibility requirements of Occupations Code, §2001.551.

(2) A Senior Citizens' Association shall submit a written request for an exemption describing the association and how it is organized. Additionally, the request shall include who will be eligible to participate in the bingo games conducted by the association.

(3) A community center having any program operated or funded by a governmental entity shall submit a written request for an exemption. The request shall include the type of program funded by the governmental entity and who will be eligible to participate in the bingo games conducted by the community center.

(4) A nursing home or hospital shall submit a written request for an exemption. The request shall include a copy of the certificate from the Texas Health Department and a statement regarding who will be eligible to participate in the bingo games conducted by the nursing home or hospital.

(5) A retirement home shall submit a written request for an exemption. The request shall include a brochure or other documentation describing the retirement home and a statement regarding who will be eligible to participate in the bingo games conducted by the retirement home.

§402.407.Unit Manager.

(a) Notification.

(1) An individual shall not provide services as a unit manager to licensed authorized organizations that have formed a unit until the following occurs:

(A) the Commission receives the unit accounting agreement executed by all members of the unit with the name of the unit manager designated therein;

(B) the individual holds a unit manager license issued by the Commission;

(D) the individual provides information to the Commission relating to the location where the unit manager services will be performed and where the records will be maintained.

(2) Bond. The required initial bond amount for a unit manager shall not exceed $30,000.00 for each unit. The unit manager's required initial bond amount will be determined by identifying the license class of each member of the unit and adding the corresponding dollar amounts for each member as follows:

(A) Classes A - D $1000

(B) Classes E - H $3000

(3) A unit manager shall provide written notification to the Commission of any change in the information in the unit manager's most recent application for a unit manager license or renewal. The unit manager shall notify the Commission of the change in the information not later than the 15th day after the date of the change.

(b) Annual License Fee for a Unit Manager. The non refundable annual license fee for a unit manager may not exceed $250.00.

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 January 7, 2005.

TRD-200500078

Kimberly L. Kiplin

General Counsel

Texas Lottery Commission

Earliest possible date of adoption: February 20, 2005

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

Subchapter E. BOOKS AND RECORDS

16 TAC §§402.500 - 402.504

The new sections are proposed pursuant to Occupations Code, §2001.054, which authorizes the Commission to adopt rules necessary to enforce and administer the Bingo Enabling Act.

Occupations Code, Chapter 2001 is affected by the proposed new sections.

§402.500.General Audit Rule.

(a) Definitions.

(1) For purposes of this section, a licensee may include a person issued a license under the Bingo Enabling Act, or a Unit.

(2) "Re-deposit" means the amount of money that must be deposited into the bingo account to restore bingo proceeds that were disbursed from the bingo account for items not authorized by the Bingo Enabling Act or the amount of bingo proceeds not deposited in the bingo account as required by Occupations Code, §2001.451(b).

(b) General Provisions. The Commission will perform an audit to determine whether a licensee is in compliance with the requirements of the Bingo Enabling Act and the Charitable Bingo Administrative Rules. The audit will be conducted in accordance with the Charitable Bingo Operations Division Audit Reference and Procedures Manual. An audit is a formal examination of a licensee's accounting records and business activities. An audit may be conducted as a result of:

(1) a request by Charitable Bingo Operations Division management;

(2) a request by another division of the Commission;

(3) a request by a Commission auditor based on compliance violations noted in a previous inspection, game observation, or review; or

(4) by random selection process based on the Charitable Bingo Operations Division's risk assessment.

(c) Notification. The Commission will notify in writing the licensee's primary operator, business contact, officer, unit manager or designated agent. The notification letter will state the period to be audited and identify the records that must be available for Commission review. Certain forms including, but not limited to, a questionnaire and a physical inventory request with instructions, may be sent by the Commission to the licensee with the notification letter. The forms must be completed prior to the entrance conference and the information must be provided in the manner prescribed by the Commission. Not later than ten working days from the date of the notification letter, the auditor will contact the licensee and schedule the date, time and place of the entrance conference. If the auditor is unable to coordinate with the licensee regarding the date and time of the entrance conference, the auditor shall set the date and time of the entrance conference and provide the licensee with written notice of the entrance conference at least ten working days prior to the entrance conference.

(d) Records Required. Records covering the designated audit period must be provided to the auditor at the entrance conference. The auditor may require other records or information based on findings during the audit. If applicable to the licensee, it must provide non-confidential records that pertain to the following in sufficient detail to substantiate compliance with the Bingo Enabling Act:

(1) The operation of bingo;

(2) The licensee's charitable distributions;

(3) The licensee's charitable purpose;

(4) Rental receipts;

(5) Expenditures; and

(6) Lease agreements.

(e) Entrance Conference.

(1) The auditor will meet with the responsible persons including the primary operator, business contact, bookkeeper, unit manager, designated agent or any other person familiar with the licensee's bingo operations. The licensee must complete the forms included with the notification letter prior to the entrance conference and must provide the requested records and completed forms at the entrance conference.

(2) If disclosure of confidential information during the audit would impair a constitutional or statutory right of privacy, then the information may be withheld so long as the licensee provides the Commission with a brief description of the information withheld, the statutory or constitutional basis for non-disclosure, and the records necessary to substantiate compliance with the Bingo Enabling Act and applicable Charitable Bingo Administrative Rules. Information the licensee believes is privileged, such as a privileged attorney/client communication or any other privilege recognized under the Texas Rules of Evidence, may be withheld so long as the licensee provides the Commission with a brief description of the information withheld, the privilege claimed, and the records necessary to substantiate compliance with the Bingo Enabling Act and applicable Charitable Bingo Administrative Rules.

(3) The ability of the licensee to withhold certain information based on privacy rights or privileges does not in any way relieve the licensee of its burden to substantiate compliance with the Bingo Enabling Act and applicable Charitable Bingo Administrative Rules. If any records requested are not provided at the time of the entrance conference the auditor will issue a written final request for these records. Except for information that is withheld due to the licensee's claim of a valid privilege, the requested records must be provided within ten working days of receipt of the request.

(4) The auditor and the licensee's authorized representative will sign a receipt form documenting the specific original records received by the auditor. Alternatively, the licensee may provide the auditor with copies of all requested records at the expense of the licensee.

(f) Fieldwork. The audit may include, but is not limited to, reviewing the licensee's financial records, performing a game observation, preparing paper depletion analysis, preparing pull-tab ticket analysis, examining all books and records necessary to substantiate the licensee's quarterly reports, verifying that bingo proceeds are disbursed according to the Bingo Enabling Act and the Charitable Bingo Administrative Rules, and meeting with members of the licensee involved in bingo to discuss its bingo operation. The auditor will provide the licensee with an estimated completion date of all fieldwork.

(g) Exit Conference.

(1) At the conclusion of the audit, the auditor will schedule an exit conference with the licensee. At the exit conference, the auditor will provide the licensee with the draft audit report, present audit findings, discuss violations noted, explain any audit schedules and explain any supporting exhibits. The auditor will also return original records to the licensee.

(2) The licensee may be represented by the primary operator, business contact, officer, unit manager, designated agent or any other person familiar with the bingo operations and accounting systems. In addition to the licensee's representative, the licensee may allow other persons to attend the exit conference.

(3) The licensee will have an opportunity to gather additional documentation related to the audit findings, alleged violations, or fund reimbursement. The licensee may use the exit conference as an avenue to resolve any alleged audit violations. The licensee will have 15 working days after the exit conference date to respond in writing to all relevant audit findings and recommendations contained in the draft audit report.

(4) Unless otherwise provided by law, the licensee must make available a copy of the audit report with detailed findings, recommendations and responses to all officers, directors, and members of the licensee.

(h) Resolution. Proof of corrective measures taken to address any alleged audit violations must be submitted in writing to the Commission within 30 working days of the exit conference. If it is determined that a licensee must make a re-deposit into its bingo bank account, the re-deposit may not be made with funds derived from the conduct of bingo.

§402.501.Distribution of Proceeds for Charitable Purposes.

(a) Before the end of each quarter, each licensed authorized organization shall disburse for charitable purposes an amount not less than 35% of the organization's adjusted gross receipts from the last preceding quarter, less the amount of authorized expenses not to exceed 6% of gross receipts.

(b) If a licensed authorized organization fails to meet the requirements of this rule for a quarter, the Commission in applying appropriate sanctions may consider whether, taking into account the amount required to be distributed during that quarter and the three preceding quarters and the charitable distributions for each of those quarters, the organization has distributed a total amount sufficient to have met the 35% requirement for that quarter and the three preceding quarters combined.

(c) For purposes of this rule, adjusted gross receipts means gross receipts less the amount of cost of goods sold by an organization and the prizes paid in the preceding quarter.

(d) Cost of goods sold by an organization is the actual cost of disposable bingo paper, instant bingo tickets, or pull-tab bingo games purchased by the organization in the preceding quarter. The cost of goods sold shall accurately reflect all discounts and returns realized by the organization. Each licensed authorized organization shall maintain, for a period of not less than four years, all invoices, credit memos, and all other supporting documentation for substantiating the cost of goods sold.

(e) For all disposable bingo paper, instant bingo tickets, and pull-tab bingo game sales made, returns accepted, and all other transactions, each licensed distributor shall furnish the licensed authorized organization a detailed invoice, credit memo, or other document, which shall include the following information:

(1) The authorized organization's name, address, and Texas taxpayer identification number;

(2) The address to which the shipment was delivered;

(3) The date of sale or credit;

(4) The quantity sold or credited;

(5) The conditions of the sale or credit; and

(6) If the transaction involves disposable bingo paper:

(A) The series number and serial number; and

(B) The cut and collation.

(7) If the transaction involves instant bingo tickets or pull-tab bingo games:

(A) The form number; and

(B) The serial/series number for each deal. Each distributor shall maintain a copy of the documents described in this subsection for a period of not less than four years.

(f) The Director of the Charitable Bingo Operations Division or his designee may reduce or disallow any cost of goods expense item which is not adequately supported or is not reasonable and necessarily expended in connection with the conduct of any game of bingo.

§402.502.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 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 the Bingo Enabling Act.

(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. §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. §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. §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. §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.

§402.503.Bingo Gift Certificates.

(a) A bingo gift certificate may be sold, issued, or redeemed for bingo paper, pull-tab bingo or card-minding devices provided that the licensed authorized organization or unit, as defined in Occupations Code, §2001.431(1), maintains adequate records relating to the gift certificate as provided in this section.

(b) A licensed authorized organization's cost of printing the bingo gift certificate is an allowable bingo expense and shall be paid out of the bingo checking account. In order to maintain adequate records relating to gift certificates, all gift certificates shall be pre-numbered and consecutively issued.

(c) A bingo gift certificate may not be awarded as a prize for bingo unless the value of the certificate is paid for by the licensed authorized organization, recorded as a bingo prize on the daily schedule of prizes for the bingo occasion, and five percent of the value of the prize is withheld as a prize fee.

(d) A bingo gift certificate may not be awarded as a door prize unless the value of the certificate is paid for before it is awarded as a door prize and funds other than bingo proceeds are used to obtain the gift certificate.

(e) Each bingo gift certificate shall be:

(1) imprinted with the name and address of the licensed location(s) where the gift certificate may be redeemed for bingo paper, pull-tab bingo or card-minding devices;

(2) imprinted with the monetary value of the certificate;

(3) imprinted with the name of the licensed authorized organization(s) authorized to accept the bingo gift certificate at the licensed location;

(4) imprinted with the expiration date or a blank space for the licensed authorized organization or unit to fill in an expiration date; and

(5) paid for by the customer in full at the time it is issued by the licensed authorized organization or unit.

(f) A licensed authorized organization may not accept a gift certificate in exchange for bingo paper, pull-tab bingo or card-minding devices if the licensed authorized organization is not licensed to conduct bingo at the licensed location(s) imprinted on the gift certificate.

(g) Reporting Requirements:

(1) Funds from the sale of the gift certificate shall be maintained separately from the bingo funds. Such funds are not considered bingo funds until the gift certificate is redeemed for a bingo card, pull-tab bingo, or a card-minding device.

(2) Funds remaining from an expired or unredeemed gift certificate shall be disbursed equally among the participating licensed authorized organizations and deposited into each of their respective general fund accounts.

(3) When a gift certificate is redeemed, the sale of bingo paper, card-minding device, or pull-tab bingo shall be reported for that occasion. The gift certificate, when redeemed, shall be exchanged for cash from the gift certificate funds and deposited into the bingo account by the end of the next business day as required by Occupations Code, §2001.451.

(4) At the end of each month, the licensed authorized organizations collectively shall reconcile the gift certificates purchased, sold, expired, redeemed, or remaining during the month to the cash on hand.

(h) Records Retention. The purchase invoice or receipt from the printing of a gift certificate and the reconciliation documents relating to the sale or redemption of gift certificates must be maintained and available for inspection by the Commission for a period of four years.

(i) Gift Certificate Log. A gift certificate log shall be maintained collectively by the participating licensed authorized organizations at the location(s) and shall include the following for each gift certificate:

(1) certificate number;

(2) certificate value;

(3) date of issue;

(4) expiration date;

(5) date of redemption; and

(6) if awarded as a bingo or door prize, the date of the bingo occasion and the date the prize is awarded.

§402.504.Debit Card Transactions.

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

(1) ATM card--An automated teller machine card which allows the holder to withdraw money directly from the holder's bank account. An ATM card is ordinarily utilized in conjunction with a PIN selected by the holder.

(2) Check card--Another name for a debit card, a check card may display the logo of the banking institution where the funds supporting the card are held in account.

(3) Debit card--A card which may be used as a means of payment under arrangements which do not provide for the extension of credit to the cardholder. The use of a debit card results in a deduction of the transaction amount directly from the cardholder's bank account maintained at the authorizing banking institution. Debit cards come in two forms commonly known as ATM cards and check cards.

(4) PIN--A personal identification number which is used as a secure or protected password used in conjunction with a debit card. A PIN may sometimes be used as an electronic signature in transactions involving a debit card.

(5) PIN pad--Equipment which may be leased from a vendor and used to identify debit card holders by verifying the authorized PIN submitted during a debit card transaction.

(b) A debit card may be accepted only in place of United States currency or a check drawn on a funded bank account.

(1) A debit card transaction sales receipt must be provided to the purchaser that uses a debit card to buy or use bingo paper/cards, electronic bingo devices or pull tabs. A copy of the debit card transaction sales receipt must be kept by the licensed authorized organization or Unit in order to substantiate compliance with the Bingo Enabling Act and the Charitable Bingo Administrative Rules.

(2) Each licensed authorized organization or unit which accepts payment by debit card must maintain records to substantiate:

(A) the timely deposit of funds derived from debit card transactions into the organization's or unit's bingo account; and

(B) the fees and expenses related to debit card transactions during the calendar quarter in which the debit card transactions occurred.

(3) All debit card transactions must be reported on the quarterly reports covering the time period in which the transactions occurred.

(4) All records relating to debit card transactions must be kept for four years.

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 January 7, 2005.

TRD-200500079

Kimberly L. Kiplin

General Counsel

Texas Lottery Commission

Earliest possible date of adoption: February 20, 2005

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

Subchapter F. PAYMENT OF TAXES, PRIZE FEES AND BONDS

16 TAC §§402.600 - 402.603

The new sections are proposed pursuant to Occupations Code, §2001.054, which authorizes the Commission to adopt rules necessary to enforce and administer the Bingo Enabling Act.

Occupations Code, Chapter 2001 is affected by the proposed new sections.

§402.600.Bingo Reports.

(a) On or before the 15th of the month prior to the end of the calendar quarter, the Commission will mail the "Texas Bingo Conductor's Quarterly Reports", "Texas Lessor Quarterly Reports", and "Manufacturer/Distributor Quarterly Reports and Supplements" to its licensees.

(b) Quarterly reports and payments due to be submitted on a date occurring on a Saturday, Sunday, or legal holiday will be due the next business day. The report will be deemed filed when deposited with the United States Postal Service or private mail service, postage or delivery charges paid and the postmark or shipping date indicated on the envelope is the date of filing.

(1) An authorized organization holding an annual license, temporary license, or a temporary authorization to conduct bingo must file on a form prescribed by the Commission or in an electronic format prescribed by the Commission a quarterly report for financial and statistical information relating to the conduct of bingo games. The report must be filed with the Commission on or before the 25th day of the month following the end of the calendar quarter even if there were no games conducted during that quarter.

(2) The report must be filed under oath attesting to the information being true and correct. Each officer and director is responsible for knowing the contents of the report. The person signing the report must promptly provide a copy of the report to such officer and director upon his/her request.

(d) Quarterly report for information relating to the lease of bingo premises.

(1) A commercial lessor holding a license to lease bingo premises must file on a form prescribed by the Commission or in an electronic format prescribed by the Commission a quarterly report stating the rental income received. The report must be filed with the Commission on or before the 25th day of the month following the end of the calendar quarter regardless of whether income was received.

(e) Quarterly report for information relating to a manufacturer or distributor license.

(1) A manufacturer or distributor shall file a report on a form prescribed by the Commission or in an electronic format prescribed by the Commission, reflecting each sale or lease of bingo equipment, and to the total sales of cards, sheets, pads and instant bingo to a person or organization in this state or for use in this state.

(2) The report shall be filed with regard to each calendar quarter and is due on or before the last day of the month following the end of the quarter. The report is due to the Commission regardless of whether sales or lease of bingo equipment occurred during the quarter.

(3) The report must be filed under oath attesting to the information being true and correct.

(f) A manufacturer or distributor shall use the eleven digit taxpayer numbers on file with the Commission when submitting information relating to the sale or lease of bingo equipment, sales of cards, sheets, pads and instant bingo. If six or more taxpayer numbers are incorrect on the report, the Commission will return the report to the manufacturer or distributor for correction. If five or less taxpayer numbers are incorrect, the Commission will notify the licensee in writing of the taxpayer numbers that were changed and the correct numbers to be used in the future.

(g) Quarterly report for information relating to a system service provider license.

(1) A system service provider shall file a report on a form prescribed by the Commission or in an electronic format prescribed by the Commission, reflecting each sale or lease of an automated bingo system to a person or organization in this state or for use in this state.

(2) The report shall be filed with regard to each calendar quarter and is due on or before the last day of the month following the end of the quarter. The report is due to the Commission regardless of whether a sale or lease of an automated bingo system occurred during the quarter.

(3) The report must be filed under oath attesting to the information being true and correct.

(h) A system service provider shall use the eleven digit taxpayer numbers on file with the Commission when submitting information relating to the sale or lease of an automated bingo system. If six or more taxpayer numbers are incorrect on the report, the Commission will return the report to the system provider for correction. If five or less taxpayer numbers are incorrect, the Commission will notify the licensee in writing of the taxpayer numbers that were changed and the correct numbers to be used in the future.

(i) Failure to receive forms. The failure of a licensee to receive forms from the Commission does not relieve the licensee from the requirement of filing reports and remitting prize fees or taxes as applicable on a timely basis.

(j) If a licensee fails to file a quarterly report as required by Occupations Code, §2001.504, the Charitable Bingo Operations Division will mail to the licensee a letter stating the quarterly report has not been filed. The applicable penalty and/or interest is due on the amount of prize fee or rental tax that was not filed timely. The licensee must file a report with the Commission even if no games were conducted or no rental tax collected.

(k) Incorrect calculation of "Texas Bingo Conductor's Quarterly Report". If the total receipts and total expenses do not total correctly, the Commission will mail the conductor a letter, with a copy of the adjusted report, stating an adjustment has been made to the quarterly report. If the adjusted quarterly report is correct, the licensee will maintain the copy in its file and no further action is required. If the licensee does not agree with the adjusted quarterly report, an amended quarterly report reflecting the correct data must be submitted to the Commission by the licensee.

(l) The Commission will deny a renewal application for a license to conduct bingo or a license to lease bingo premises or revoke a license to conduct bingo or a license to lease bingo premises if the licensee has failed to pay timely the prize fee or rental tax due three times within a 12 month period.

(m) Extensions.

(1) Filing extension because of natural disaster.

(A) The Director will grant to a licensee who has been identified as a victim of a natural disaster an extension of not more than 90 days to file a quarterly report or pay rental tax or prize fees provided the licensee has filed a timely request for an extension. In determining the natural disaster victims, the Commission shall recognize the counties that have been identified by the Comptroller of Public Accounts.

(B) The person owing the quarterly report, rental tax or prize fees must file a written request for an extension at any time before the expiration of five working days after the original due date in order to obtain an extension.

(C) If an extension under this paragraph is granted, interest on the unpaid rental tax or prize fee does not begin to accrue until the day after the day on which the extension expires, and rental tax, prize fees, and penalties are assessed and determined as though the last day of the extension were the original due date.

(2) Filing extension for reasons other than natural disaster.

(A) The Director may grant an extension of not more than 30 days for the filing of a quarterly report. Before a request for extension may be granted, a written request setting out the reasons or grounds for an extension and 90% of the prize fees or rental tax estimated to be due must be received by the Commission postmarked on or before the due date of the quarterly report.

(B) The granting of a request is within the discretion of the Director and the licensee will be notified in five working days of the request of the decision of the Director.

(C) If the request is denied, there will be no penalty assessed if the return is filed and remaining prize fee or rental tax is paid not later than ten days from the date of the denial of the request of the extension.

(3) A request postmarked after the due date for the filing of a request will not be considered.

§402.601.Interest on Delinquent Tax.

(a) Interest on Delinquent Tax.

(1) The yearly interest rate on delinquent prize fees or rental taxes is variable and is the prime rate plus one percent, as published in The Wall Street Journal on the first day of each calendar year that is not a Saturday, Sunday, or legal holiday.

(2) Delinquent taxes draw interest beginning 60 days after the date the taxes are due.

(b) Interest on Refund or Credit.

(1) Except as provided by paragraphs (1) and (2) of subsection (a), interest is at the rate set out in subsection (a)(1), for the amount found to be erroneously paid by the licensee for prize fee or rental tax for a period, as determined by the Charitable Bingo Operations Division,

(A) beginning on the later of 60 days after the date of payment or the date the quarterly report is required to be filed with the Charitable Bingo Operations Division; and

(B) ending on either the date of allowance of credit on account of the Charitable Bingo Operations Division's decision or audit or a date not more than ten days before the date of the refund warrant, as determined by the Charitable Bingo Operations Division.

(2) A credit of $100.00 or less entered by a licensed authorized organization or lessor on its quarterly report does not accrue interest. The credit will be preprinted on the quarterly report reflecting the amount of the credit to be taken from the current quarter. A credit taken by a licensed authorized organization or lessor on the quarterly report does not accrue interest.

(3) For a refund processed for a tax or fee due, the rate of interest is the rate set out in subsection (a)(1) of this section.

(4) A warrant for interest payments shall be drawn against the fund or account into which the overpaid prize fee or rental tax was deposited.

§402.602.Waiver of Penalty, Settlement of Prize Fees, Rental Tax, Penalty and/or Interest.

(a) The Charitable Bingo Operations Director, for good cause shown, may waive a penalty if a licensee holding a license to conduct bingo or license to lease bingo premises exercised reasonable diligence to comply with Occupations Code, §2001.504. The Charitable Bingo Operations Division will not consider a request for a penalty or interest waiver until the principal related to the specific request is paid in full. To be considered, a written request stating the reason(s) penalty should be waived must be sent to the Charitable Bingo Operations Division within 14 days of the date the quarterly report and prize fees and rental taxes were due.

(1) The Charitable Bingo Operations Division will inform the licensee in writing within three days of the Charitable Bingo Operations Division's decision regarding the penalty waiver request after considering:

(A) Whether the licensee is current in the filing of all reports;

(B) Whether the licensee is current in the payment of all taxes or prize fees due for the last eight consecutive quarters;

(D) Whether the licensee has a good record of timely filing and paying past returns; and

(E) Whether the licensee has taken the necessary steps to correct the problem for future reporting.

(2) If a licensee has had a penalty waived within the last eight consecutive quarters, the current request will be denied.

(b) If a prize fee or rental tax is owed for an inactive account, the Charitable Bingo Operations Division will not consider a request for a penalty or interest waiver until the principal is paid in full.

(c) Settlement of rental tax, gross receipts tax, prize fee, penalty or interest on an inactive account. The Commission may settle a claim for rental tax, gross receipts tax, prize fee, penalty, or interest if the total cost of collection, as determined by the Commission, would exceed the total amount due.

§402.603.Bonds or Other Security.

(a) Who Must Post a Bond or Security.

(1) Manufacturer. Each application for a license to manufacturer bingo equipment or supplies must be accompanied by a cash bond or a bond issued by a surety company in the amount of $10,000. A license will not be issued until the bond or security is received by the Commission.

(2) Commercial lessor. Each application for a license to lease bingo premises must be accompanied by a bond or other security. The Commission will determine the amount of bond or security sufficient to protect the state against failure to pay rental tax. In determining the amount of bond or security, the Commission will examine the four most recent quarterly tax reports filed by two licensed lessors in the same city or county that are similar in size and operations. The Commission will calculate an average gross rental tax based on the four most recent quarterly tax reports of these two licensed lessors. The amount of bond or security required to be posted by the applicant shall be three times the average gross rental tax calculated for the two lessors in the same city or county. A bond or security is not required for a lessor who does not collect rent from the organization(s) conducting bingo at the location identified in the application to lease bingo premises. Except as otherwise provided in this paragraph, a license will not be issued until the bond or security is received by the Commission.

(3) Conductor. Each application for an annual license to conduct bingo occasions must be accompanied by a bond or other security. The Commission will determine the amount of bond or security sufficient to protect the state against failure to pay prize fee. In determining the amount of bond or security, the Commission will examine the four most recent quarterly reports to determine prize fees paid by conductors licensed at the same playing location or, if no conductors are licensed at the same playing location, the Commission will examine the four most recent quarterly reports to determine prize fees paid by two conductors in the same city or county that are similar in size and operations. The Commission will calculate an average prize fee based on the four most recent quarterly tax reports of these two identified conductors. The amount of bond or security required to be posted by the applicant shall be three times the average prize fee calculated for the two identified conductors either in the same playing location or the same city or county, as applicable. A license will not be issued until the bond or security is received by the Commission.

(b) Type of security or bonds.

(1) Cash or check made payable to the state comptroller. Cash security does not earn interest for the licensee.

(2) Irrevocable assignments of either a savings account or a certificate of deposit in an institution insured by an agency of the United States government. This security must be irrevocable and must be executed on an assignment form approved by the Commission.

(c) Surety bond must be executed on a form approved by the Commission and can be issued only by a surety company chartered or authorized to do business in the State of Texas. The bond shall constitute a new and separate obligation in the penal sum named in the bond for each calendar year or a portion of the year while the bond is in force. The bond must be executed by an attorney-in-fact appointed by the surety. The appointing instrument must be properly notarized and physically attached to the bond.

(d) Bond Cancellation by Surety Company. If a surety company notifies the Commission in writing that it has withdrawn as surety issued on behalf of a licensee as security for prize fee or rental tax, the Commission shall notify the licensee in writing that it must post a new bond to maintain its license. Failure to submit a new bond within 20 days of such notice is grounds for denial of an application for renewal of license or revocation of the license.

(e) Increase in the Amount of Bond or Security. The Commission may increase the amount of the bond or security at the time a jeopardy determination becomes final or when a conductor or lessor is renewing its license if the existing bond or security does not cover three times the licensee's average quarterly prize fee or rental tax liability. The licensee's average quarterly prize fee or rental tax is calculated using the four most recent consecutive quarters. The Commission shall notify the licensee in writing of the increase. Failure to submit the increased amount of bond within 20 days of such notice is grounds for denial of an application for renewal of license or revocation of the license.

(f) Forfeiture. If a licensee pays less than the total amount of prize fee or rental tax due, the Commission shall notify both the licensee and surety company of the delinquency via the "Texas Notice of Tax/Prize Fee Due" for the quarter in which the liability exists. If payment is not made by the licensee by the demand date stated in the notice, the Commission will forfeit the bond or security or any part of the bond or security necessary to pay the proper amount of prize fee or rental tax liability due. Failure to pay any prize fee or rental tax when due is grounds for denial of an application for renewal license or revocation of the license. If the bond is forfeited and a new or additional bond has been submitted to replace the forfeited bond, the new or additional bond will not be released until the license no longer exists.

(g) Release of Bond or Security. If the licensee has filed all required returns, has no outstanding prize fee, rental tax, penalty or interest due and has completed eight consecutive quarters without a jeopardy determination becoming final, the bond or security will be released at the time the licensee next renews its license. If the licensee ceases to conduct bingo or to lease bingo premises and relinquishes its license or if the license is denied or revoked by the Commission for any reason, the Commission will release any bond or security if the Commission determines that no amount of prize fee, rental tax, penalty, or interest remains due and payable and all quarterly reports due have been filed with the Commission. The Commission will notify the licensee in writing that the bond or security has been released. A manufacturer's bond will be released at the time the Commission is notified by certified mail that the manufacture will no longer be licensed in Texas.

(h) Reinstatement of Bond or Security. If a jeopardy determination becomes final for rental tax or prize fee, the Commission will notify the licensee that a bond or security will be required. The amount of bond or security shall be three times the average rental tax or prize fee due for the quarter in which the determination became final plus the previous three quarters. The Commission will use the four most recent consecutive quarters to determine an average amount due and will multiply the average by three to arrive at the amount of bond or security required.

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 January 7, 2005.

TRD-200500080

Kimberly L. Kiplin

General Counsel

Texas Lottery Commission

Earliest possible date of adoption: February 20, 2005

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

Subchapter G. COMPLIANCE AND EQUIPMENT

16 TAC §§402.700 - 402.704

The new sections are proposed pursuant to Occupations Code, §2001.054, which authorizes the Commission to adopt rules necessary to enforce and administer the Bingo Enabling Act.

Occupations Code, Chapter 2001 is affected by the proposed new sections.

§402.700.Denials; Suspensions; Revocations; Hearings.

(a) Denial of application. If the Director of the Charitable Bingo Operations Division determines that an applicant is not eligible for a license on statutory or regulatory grounds, or that the license should be denied on statutory or regulatory grounds which would justify suspension or revocation of an existing license, he/she will notify the applicant in writing that the application has been denied and will state such grounds for the denial. If the applicant desires to contest the denial, the applicant must, within 30 days of the date of the notice of denial, make a written request for a hearing to contest the denial.

(b) Suspension and revocation.

(1) Grounds. The Commission may suspend or revoke a license or temporary authorization in accordance with the Bingo Enabling Act, §2001.355. If the Commission proposes to revoke or suspend a license it will notify the licensee in writing and will state the grounds for the proposed action.

(2) Summary suspension. Grounds for summary suspension of licenses, provisions for service of notice to licensees and show-cause hearings, and the time period for requesting final hearings on suspension or revocation of licenses, and other related matters are contained in the Bingo Enabling Act.

(1) All hearings will be conducted in accordance with the relevant portions of Title 16, Part 9, Chapter 401, Subchapter C.

(2) After a hearing on the alleged violation and upon finding that a violation did occur, the Commission may suspend a license or temporary authorization for a period not to exceed one year or may revoke a license or temporary authorization. The period of a suspension begins on the date of the order invoking the suspension, or the date of the order overruling the motion for rehearing, if one was filed.

(3) In the event a licensee has requested an administrative hearing, and has made timely and sufficient application for renewal of its license, the licensee may be issued a temporary authorization to conduct bingo and continue to act pursuant to said authorization until the Commission issues a final decision, regardless of whether said license has expired during the hearing process.

(d) Reapplication. No person or organization whose license has been revoked or forfeited, or whose application has been denied for reasons which would justify a revocation of an existing license will be eligible to apply for another license earlier than one year from the date of forfeiture, revocation, or denial.

§402.701.Investigation of Applicants for Licenses.

(a) Each person required to be named in an application for a license under the Bingo Enabling Act is subject to a criminal history record inquiry.

(b) Each person required to be named in an application for any license under the Bingo Enabling Act shall promptly furnish all information requested by the Commission to obtain criminal history record information from the Texas Department of Public Safety, Federal Bureau of Investigation, or other law enforcement agency. Falsification or nondisclosure of requested information shall result in the denial, revocation, or suspension of a license under the Bingo Enabling Act.

(c) The existence of a disqualifying conviction on records obtained by the Commission is prima facie evidence of disqualification. The burden of proof is on the applicant to show otherwise.

§402.702.Location Verification Inspection.

(a) Purpose. The purpose of the location verification inspection is to verify that the location requirements for a conductor, lessor, distributor, manufacturer, and system service provider license are in compliance with the Bingo Enabling Act.

(1) Conductor Location Verification Inspection. An organization applying for a license to conduct bingo or changing its principal business location is subject to an on-site verification inspection. This inspection is to provide assistance to the applicant or licensee with the licensing process and to review the applicant or licensee's business records. The Commission may visit the location identified as the Primary Business office on the application to verify the following:

(A) The location listed is where the applicant or licensee is primarily conducting business;

(B) The location listed is where the applicant or licensee's records relating to its primary purpose are maintained in the ordinary course of business; and

(C) The county listed is the county in which the applicant or licensee is principally located. During the site verification inspection, the Commission may obtain items or information missing from the application that have been previously requested by the Commission. A pre-licensing interview is held with every applicant filing an original license application. The interview may be conducted at the organization's next scheduled general meeting.

(2) Lessor Location Verification Inspection. A person or organization applying for a lessor license or amending its license to move to another playing location is subject to an on-site verification inspection. This inspection is to provide assistance to the applicant or licensee with the licensing process and review the applicant or licensee's business records. The Commission may visit the location identified on the application as the playing location to verify the following:

(A) The county listed is the county in which the proposed activity is located;

(B) The proposed bingo premises is located at the "Lessor Location Address" as stated on the license application;

(D) No more than one bingo premises exists under a common roof or over a common foundation.

(3) Manufacturer, Distributor, and System Service Provider Location Verification Inspections. A person applying for a manufacturer, distributor, or system service provider license is subject to an on-site verification inspection. This inspection is to provide assistance to the applicant or licensee with the licensing process and review the applicant or licensee's business records. A manufacturer, distributor, or system service provider location verification inspection will be conducted for the following situations:

(A) Newly licensed manufacturer, distributor, or system service provider; or

(B) New location of a currently licensed manufacturer, distributor, or system service provider.

(b) Notification. The Commission may contact the applicant to arrange to meet and conduct the inspection. An operator or business contact listed on the records with the Commission must attend the location verification inspection.

§402.703.Books and Records Inspection.

(a) Purpose. The books and records inspection is an education-based review designed to train a licensee in the proper method of establishing and maintaining bingo related accounting records. The books and records inspection will be conducted by the Commission within six months of issuance of the original license or as otherwise necessary. The books and records inspection will be conducted at a time other than a bingo occasion. However, the auditor may observe an occasion as deemed necessary.

(b) Scope. The scope of a books and records inspection shall cover a minimum of one calendar quarter. A books and records inspection will be conducted in accordance with the procedures contained in the Charitable Bingo Operations Division Audit Reference and Procedures Manual.

(c) Notification. The Commission will notify in writing the licensee's operator or business contact of the books and records inspection. An operator or business contact must attend the books and records inspection. In addition, any person with knowledge of the operation and record keeping practices may accompany the operator or business contact.

(d) Inspection. The books and records to be reviewed or examined will include those records that relate to the operation of bingo and the licensee's charitable distributions. The books and records inspection is a limited examination of the licensee's records and is not intended to replace an audit conducted in accordance with §402.500 of this chapter.

(e) Inspection Results. At the conclusion of the books and records inspection, the auditor will communicate any compliance issues noted during the inspection and make recommendations to the operator, business contact or any person with knowledge of the operation and recordkeeping practices of the licensee. The auditor will request the operator or business contact to sign a form stating that he or she understands the findings, if any. If the operator or business contact refuses to sign the form, the auditor will indicate the refusal on the form. The auditor will provide the operator or business contact with a copy of the form. If the books and records inspection reveals numerous or serious compliance issues, the Commission may undertake further reviews of the licensee's records as appropriate.

§402.704.Tax Review Inspection.

(a) Purpose. The tax review inspection is to obtain delinquent quarterly reports and/or delinquent fees or taxes owed to the State, determine the reason(s) for the licensee's failure to submit timely the quarterly reports and/or fees or taxes, and inform the organization's representative(s) of the requirements of provisions of the Bingo Enabling Act and the Charitable Bingo Administrative Rules relating to the filing of quarterly reports and the payment of taxes and fees.

(b) Tax Review. A tax review inspection is performed for the following reasons:

(1) A licensee failed to file a quarterly report. A licensee that fails to file a quarterly report three times in a 12 month period is subject to disciplinary action under §402.600(l) of this chapter.

(2) A licensee received a "Notice of Prize Fee or Taxes Due" indicating unpaid prize fees, rental taxes, penalties, or interest are delinquent because they were not timely remitted to the Commission;

(3) A licensee failed to pay the full amount of prize fees, rental tax, penalties, or interest due.

(c) Contact. The Commission will contact the primary operator or business contact to request records, quarterly report(s), and/or delinquent taxes or fees. The Commission may arrange a meeting with the primary operator or business contact to obtain the records, quarterly report(s), and/or delinquent taxes or fees.

(1) The auditor will review the delinquent Quarterly Report(s) and the check or money order for accuracy.

(2) The auditor will inform the primary operator or business contact of the violation(s) and corrective action required and issue a "Charitable Bingo Audit Violations" form, documenting the specific violation(s) of the Bingo Enabling Act. The auditor will give the operator or the organization's representative a copy of the form and the original receipt of payment, if applicable.

(d) Further examination. Based on the outcome of the tax review inspection, a more detailed examination of the records may be required.

§402.705.Compliance Review.

(a) General Provisions. A compliance review is conducted to determine if a licensee's records are in compliance with the Bingo Enabling Act and this chapter. The compliance review process may be initiated by, but is not limited to, any of the following:

(1) a request by Charitable Bingo Operations Division management;

(2) a request by another division of the Commission;

(3) a request by Commission bingo auditors based on compliance violations noted in a previous inspection or game observation, or

(4) by random selection process based on the risk assessment performed by the Charitable Bingo Operations Division.

(b) Scope. The scope of the compliance review is initially limited to the calendar quarter associated with the request for the compliance review or the risk assessment. The scope of the review may be expanded to cover additional calendar quarters if the records warrant. The compliance reviews will be conducted in accordance with the procedures contained in the Charitable Bingo Operations Division Audit Reference and Procedures Manual.

(c) Notification. Notice of the compliance review will be provided in accordance with the provisions of §402.500 of this chapter.

(d) Entrance Conference. The entrance conference will be conducted in accordance with the provisions of §402.500 of this chapter.

(e) Fieldwork.

(1) A compliance review may include an examination of the licensee's bingo expenses, receipts, and charitable distributions to determine whether the distributions were consistent with the donor licensee's stated charitable purpose, the Bingo Enabling Act, and the Charitable Bingo Administrative Rules, as necessary.

(2) If the auditor determines a more detailed examination of records is necessary, the compliance review will be concluded, and a report will be prepared with the auditor's recommendation that an audit be conducted in accordance with §402.500 of this chapter.

(f) Exit Conference. An exit conference will be conducted in accordance with the provisions of §402.500 of this chapter.

(g) Resolution. A resolution resulting from the compliance review process will be conducted in accordance with the provisions of §402.500 of this chapter.

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 January 7, 2005.

TRD-200500081

Kimberly L. Kiplin

General Counsel

Texas Lottery Commission

Earliest possible date of adoption: February 20, 2005

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

Chapter 402. BINGO REGULATION AND TAX

16 TAC §§402.520, 402.530, 402.531, 402.535, 402.540 - 402.550, 402.554 - 402.556, 402.558, 402.567, 402.568, 402.571, 402.573, 402.580 - 402.584, 402.590 - 402.592, 402.595, 402.596, 402.598, 402.601, 402.602

(Editor's note: The text of the following sections proposed for repeal will not be published. The sections 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.)

Texas Lottery Commission (Commission) proposes the repeal of Title 16, Part 9, Chapter 402, §§402.520, 402.530, 402.531, 402.535, 402.540 - 402.550, 402.554 - 402.556, 402.558, 402.567, 402.568, 402.571, 402.573, 402.580 - 402.584, 402.590 - 402.592, 402.595, 402.596, 402.598, 402.601, and 402.602, concerning Bingo Regulation and Tax. By separate action, the Commission will publish proposed new Chapter 402 which will make nonsubstantive changes, including: (1) renaming Chapter 402 the "Charitable Bingo Administrative Rules;" (2) reorganizing Chapter 402 into subchapters; (3) updating legal citations; and (4) deleting references to obsolete dates.

Lee Deviney, Financial Administration Director, has determined there will be no significant fiscal impact for state or local government as a result of the repeal of Chapter 402 and proposed new Chapter 402. Any costs to the State could be absorbed by current resources. For each year of the first five years the repeal and subsequent new Chapter 402 is in effect, the fiscal impact is the following: FY 05, $0; FY 06, $0; FY 07, $0; FY 08, $0; FY 09, $0. Additionally, there will be no effect on individuals, small businesses, micro businesses or local or state employment.

William L. Atkins, Director, Charitable Bingo Operations Division, has determined that for each of the first five years the repeal and subsequent new Chapter 402 as proposed is in effect, the public will benefit from the adoption.

Comments on the proposed repeal of Title 16, Part 9, Chapter 402 may be submitted to Sandra Joseph, Assistant General Counsel, Texas Lottery Commission, P.O. Box 16630, Austin, Texas 78761-6630. The Commission will hold a public hearing on this proposal at 10:00 a.m. on February 3, 2005. Comments must be received within 30 days after publication of this proposed repeal in order to be considered.

The repeal is proposed pursuant to Occupations Code, §2001.054, which authorizes the Commission to adopt rules necessary to enforce and administer the Bingo Enabling Act.

Occupations Code, Chapter 2001 is affected by the proposed repeal.

§402.520.Temporary License.

§402.530.Registry of Approved Bingo Workers.

§402.531.Advisory Opinions.

§402.535.Debit Card Transactions.

§402.540.General Licensing Provisions.

§402.541.Definitions.

§402.542.Investigation of Applicants for Licenses.

§402.543.Denials; Suspensions; Revocations; Hearings.

§402.544.License Fees.

§402.545.Licenses for Conduct of Bingo Occasions and to Lease Bingo Premises.

§402.546.Temporary Authorization.

§402.547.Prohibited Bingo Occasion.

§402.548.General Restrictions on the Conduct of Bingo.

§402.549.Exemptions from Licensing Requirements.

§402.550.Training Program.

§402.554.Pull-Tab Bingo.

§402.555.Card-Minding Systems.

§402.556.Pull-tab or Instant Bingo Dispensers.

§402.558.Bingo Card/Paper.

§402.567.Bingo Advisory Committee.

§402.568.Distribution of Proceeds for Charitable Purposes.

§402.571.System Service Provider.

§402.573.Bingo Gift Certificates.

§402.580.Bingo Reports.

§402.581.Interest on Delinquent Tax.

§402.582.Waiver of Penalty, Settlement of Prize Fees, Rental Tax, Penalty and/or Interest.

§402.583.Bonds or Other Security.

§402.584.Transfer of Funds.

§402.590.General Audit Rule.

§402.591.Location Verification Inspection.

§402.592.Books and Records Inspection.

§402.595.Tax Review Inspection.

§402.596.Compliance Review.

§402.598.Charitable Use of Proceeds.

§402.601.Unit Manager.

§402.602.Unit Accounting.

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 January 7, 2005.

TRD-200500083

Kimberly L. Kiplin

General Counsel

Texas Lottery Commission

Earliest possible date of adoption: February 20, 2005

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