PRINTER'S NO. 2118
No. 1728 Session of 1989
INTRODUCED BY TRELLO, MAIALE, GIGLIOTTI, OLASZ, O'BRIEN, HOWLETT, PISTELLA, TIGUE, KENNEY, PRESTON, DALEY, CIVERA, HALUSKA AND LAUGHLIN, JUNE 20, 1989
REFERRED TO COMMITTEE ON FINANCE, JUNE 20, 1989
AN ACT 1 Providing for licensing and placement of video poker machines in 2 this Commonwealth, for powers and duties of the Department of 3 Revenue, for local option and for distribution of revenues. 4 TABLE OF CONTENTS 5 Section 1. Short title. 6 Section 2. Definitions. 7 Section 3. Powers and duties of department. 8 Section 4. Use of enforcement agents. 9 Section 5. Unlawful use by minors. 10 Section 6. Direct dispensing. 11 Section 7. Local option. 12 Section 8. Authority to license. 13 Section 9. Distribution of proceeds. 14 Section 10. Local government revenues. 15 Section 11. Cities of the first class. 16 Section 12. Creation of account. 17 Section 13. Preemption of local taxes and license fees. 18 Section 14. Existing machines.
1 Section 15. Penalty. 2 Section 16. Exemption from State gambling laws. 3 Section 17. Exemption from Federal regulation. 4 Section 18. Effective date. 5 The General Assembly of the Commonwealth of Pennsylvania 6 hereby enacts as follows: 7 Section 1. Short title. 8 This act shall be known and may be cited as the Video Poker 9 Control Law. 10 Section 2. Definitions. 11 The following words and phrases when used in this act shall 12 have the meanings given to them in this section unless the 13 context clearly indicates otherwise: 14 "Clubs." Nonprofit establishments which have a valid club 15 liquor license under the act of April 12, 1951 (P.L.90, No.21), 16 known as the Liquor Code. 17 "County." A county of the first or second class. 18 "Department." The Department of Revenue of the Commonwealth. 19 "Distributor." An individual, partnership or corporation 20 licensed under this act to buy, sell, lease or distribute video 21 poker machines. The term excludes machine owners and 22 manufacturers. 23 "Gross proceeds." The total amount of money placed into 24 video poker machines by players. 25 "Incentives." A consideration, including a premium or bonus 26 in cash or advance commission or merchandise offered from a 27 machine owner to a licensed establishment in order to solicit 28 its business. 29 "Licensed establishment." A restaurant, bar, tavern, hotel 30 or club which has a valid liquor license under the Liquor Code 19890H1728B2118 - 2 -
1 and which is located within a participating political 2 subdivision. 3 "Machine owner." An individual, partnership or corporation 4 licensed under this act that owns, services and maintains video 5 poker machines for placing in various State-approved places. 6 "Manufacturer." An individual, partnership or corporation 7 licensed under this act that manufactures or assembles video 8 poker machines. 9 "Net profits." Gross proceeds after prizes, and license fees 10 as provided for in section 8(a)(3), have been paid. 11 "Operator." A club or establishment licensed under this act 12 to offer video poker by the placing and making available for 13 play of video poker machines. 14 "Participating political subdivision." A city, township, 15 borough or school district where video poker machines are in use 16 under this act. 17 "Video poker machine." A device or machine which, upon 18 insertion of a coin, is available to play or simulate the play 19 of the game of poker utilizing a video display and 20 microprocessors and in which, whether by the skill of the player 21 or by chance, the player may receive free games or credits which 22 can be redeemed for cash or anything of value. 23 Section 3. Powers and duties of department. 24 (a) General powers and duties.--The department has the power 25 and duty: 26 (1) To promulgate regulations to: 27 (i) Provide for licensing procedures under this act. 28 (ii) Prescribe necessary application and reporting 29 forms to be used under this act. 30 (iii) Prescribe electronic accounting devices 19890H1728B2118 - 3 -
1 necessary to verify reports to be used in this act. 2 (2) To grant or deny license applications. 3 (3) To employ enforcement agents and other employees 4 necessary to carry out the functions of the department under 5 this act. Persons employed must be citizens of the United 6 States. Persons employed must not have a direct or indirect 7 interest in a person or entity licensed under this act. 8 Persons employed shall be fingerprinted and bonded. The 9 department may not employ persons who have done one of the 10 following: 11 (i) Been convicted of or pleaded guilty or no 12 contest to a felony. 13 (ii) Been convicted of, pleaded guilty or no contest 14 to, paid a fine for, or forfeited a bond to appear in 15 relation to a violation of a Federal or state statute 16 concerning gambling or lottery devices, equipment or 17 games. 18 (4) Inspect and approve a video poker machine 19 representative of each type of machine to be used in video 20 poker games and conduct spot inspections of video poker 21 machines on premises where they are being played to ensure 22 that the devices comply with this act and regulations 23 promulgated under paragraph (1) and that the devices do not 24 vary in a meaningful manner from the inspected and approved 25 representative device of the same type. 26 (b) License approval.--The department may not grant an 27 applicant a machine owner or licensed establishment license 28 unless: 29 (1) If the applicant is an individual all of the 30 following apply: 19890H1728B2118 - 4 -
1 (i) The applicant is an honest person of good 2 character and integrity and is qualified and has adequate 3 financing from suitable sources. 4 (ii) The applicant is a citizen of the United States 5 and a resident of this Commonwealth for at least two 6 years previous to the application. 7 (iii) The applicant has not been convicted of nor 8 pleaded guilty or no contest to a felony. 9 (iv) The applicant has not been convicted of, 10 pleaded guilty or no contest to, paid a penalty for, nor 11 forfeited a bond to appear in relation to a violation of 12 a Federal or state statute concerning gambling or lottery 13 devices, equipment or games. 14 (v) The applicant has no direct or indirect interest 15 in a person or entity holding a type of license other 16 than the type for which the applicant is applying. 17 (2) If the applicant is a partnership, the partners, 18 general and limited, qualify as individuals under paragraph 19 (1). 20 (3) If the applicant is a corporation all of the 21 following apply: 22 (i) It is a registered Pennsylvania corporation for 23 at least two years. 24 (ii) At least 50% of its directors are Pennsylvania 25 residents for at least two years. 26 (iii) All officers qualify as individuals under 27 paragraph (1). 28 (iv) Its stockholders are individuals. 29 (v) Every stockholder owning 5% or more of the stock 30 of the corporation qualifies as an individual under 19890H1728B2118 - 5 -
1 paragraph (1). 2 (c) Hearing.--A person who was denied a license has the 3 right to a hearing before the department. The hearing shall be 4 conducted under 2 Pa.C.S. Ch. 5 Subch. A (relating to practice 5 and procedure of Commonwealth agencies). 6 (d) Winning percentage.--The department shall prescribe 7 necessary machine accounting information under subsection 8 (a)(1)(iii). Video poker machines shall be set to award players 9 minimum winnings of 78%. Video poker machines shall have 10 electronic accounting devices to verify revenue due and winning 11 percentages. 12 (e) Violations.--The department shall investigate, penalize 13 civilly and suspend or revoke licenses for violations of this 14 act and shall hold hearings in which to consider these matters. 15 A license may not be suspended or revoked until a hearing is 16 completed. The fine for a violation of this act may not exceed 17 $5,000 for the first violation and $15,000 for each subsequent 18 violation. In addition to the fine, interest on any moneys held 19 improperly, as the department may prescribe, shall be collected. 20 Section 4. Use of enforcement agents. 21 (a) Powers.--Employees of the department designated as 22 enforcement agents are empowered to investigate the background 23 and associates of license applicants to whatever extent is 24 judged necessary by the department. No investigation may be 25 undertaken prior to the submission of an application for a 26 license by a party. No investigation may continue subsequent to 27 the granting of a license, the denial of a license or the 28 withdrawal of a license application. 29 (b) Authority.--Enforcement agents are empowered to be peace 30 officers and shall have police power and authority throughout 19890H1728B2118 - 6 -
1 this Commonwealth to arrest, on view or under warrant, a person 2 who is violating a criminal provision of this act. 3 (c) Investigation and report.--Enforcement agents may 4 investigate alleged illegal activities concerning video poker 5 machines and their operation, maintenance and placement. 6 Findings shall be reported in writing to the department. The 7 department shall relay suspected criminal activity or violations 8 of the law to the appropriate district attorney for prosecution. 9 (d) State and local police.--In addition to any other person 10 authorized to enforce the provisions of this act, the 11 Pennsylvania State Police and police of participating political 12 subdivisions are empowered to enforce this act. 13 Section 5. Unlawful use by minors. 14 (a) Minors.--No person under 21 years of age may use or play 15 the video poker machines. A minor using or playing or attempting 16 to use or play a video poker machine commits a summary offense 17 and shall, upon conviction, pay a fine not in excess of $1,000. 18 (b) Licensees.--A licensed establishment which permits a 19 person under 21 years of age to play or use the video poker 20 machines, whether or not that licensed establishment is actually 21 aware of the minor's age, commits a summary offense and shall, 22 upon conviction, pay a fine not in excess of $5,000. The 23 establishment of the following facts by a person allowing a 24 minor to operate the video poker machines constitutes a defense 25 to prosecution under this subsection: 26 (1) The minor falsely represented in writing that the 27 minor was 21 years of age or older. 28 (2) The appearance of the minor was such that an 29 ordinary person of prudent judgment would believe the minor 30 to be 21 years of age or older. 19890H1728B2118 - 7 -
1 (3) The permission to operate the video poker machines 2 was made in good faith, relying upon written representation 3 and appearance and in the reasonable belief that the minor 4 was actually 21 years of age or older. 5 Section 6. Direct dispensing. 6 A video poker machine may not directly dispense coins, cash, 7 tokens or any other article of exchange or value except for 8 receipts tickets. Such tickets shall be dispensed by pressing 9 the ticket-dispensing button on the machine at the end of one's 10 turn of play. The ticket shall indicate the total amount of 11 credits and prize money won, and the player shall turn in this 12 ticket to the appropriate person at the licensed establishment 13 to receive his prize money. The cost of a credit shall be 25¢ 14 and the number of credits played per game shall not exceed four. 15 No prize for any individual game shall exceed $400. A video 16 poker machine shall be designed and manufactured to record all 17 use of the device and the amounts deposited in the device. 18 Section 7. Local option. 19 (a) Placement on ballot.--A majority of the voters of a 20 county have the option to approve or rescind approval of the 21 placement of video poker machines within its boundaries if 22 approval or rescission of approval is in conformity with the act 23 of June 3, 1937 (P.L.1333, No.320), known as the Pennsylvania 24 Election Code. The question shall be placed upon the ballot of 25 that county for the next regularly scheduled election if 15% of 26 the registered voters of that county sign a petition requesting 27 that the question be put on the ballot. Votes shall be totaled 28 by municipality and the question shall only be considered 29 approved in a particular municipality if a majority of the 30 voters voting in both the county and that municipality voted 19890H1728B2118 - 8 -
1 affirmatively on the question. The results shall be transmitted 2 to the Secretary of the Commonwealth, who shall have the duty of 3 informing the department of the result. 4 (b) Special election.--No special election shall be held to 5 answer this question. However, if a special election is held to 6 decide other matters, this question may properly be placed on 7 that ballot along with the other matters to be decided. 8 (c) Restriction.--Notwithstanding the provisions of 9 subsections (a) and (b), no election for the purpose of deciding 10 whether video poker machines may be placed in licensed 11 establishments within any municipality in any county or 12 rescinding such a decision may be held within two years of any 13 prior election in which such a question appeared on the ballot. 14 Section 8. Authority to license. 15 (a) Types of license.--After approving the proper 16 applications, the department may issue the following licenses: 17 (1) A manufacturer's license may be issued to an 18 individual, partnership or corporation that manufactures, 19 assembles or produces video poker machines for use in this 20 Commonwealth. The annual fee shall be $25,000. 21 (2) A distributor's license may be issued to an 22 individual, partnership or corporation that buys, sells, 23 leases or distributes video poker machines in this 24 Commonwealth. The annual fee shall be $10,000. 25 (3) A machine owner's license may be issued to a person 26 who owns, services and maintains video poker machines for 27 placement in licensed establishments. The annual fee shall be 28 $25,000 for the first 50 individual video poker machine 29 licenses. For each additional video poker machine, the annual 30 fee shall be $500 per machine. Every video poker machine in 19890H1728B2118 - 9 -
1 use in this Commonwealth must have a current $500 license 2 displayed. Every video poker machine licensed under this act 3 must be manufactured by an individual, partnership or 4 corporation licensed under paragraph (1). 5 (4) A licensed establishment shall obtain a licensed 6 establishment license in order to have video poker machines 7 on its premises. The annual fee for the license shall be as 8 follows: 9 (i) Class I - $500 (for up to and including three 10 video poker machines). 11 (ii) Class II - $1,500 (for up to and including five 12 video poker machines). 13 (iii) Class III - $5,000 (for up to and including 14 ten video poker machines). 15 (b) Requirements.--For a licensed establishment which uses 16 video poker machines, the number of video poker machines allowed 17 shall be two for the first 500 square feet of serving area 18 within the establishment and one for each additional 500 square 19 feet of serving area within the establishment and the maximum 20 number of video poker machines allowed shall be ten. No video 21 poker machines may be placed in a licensed establishment unless 22 the owner, or, in the case of a club, the proper authority of 23 the licensed establishment, has entered into a contract with a 24 machine owner for the placement of the machines for a minimum 25 term of one year. 26 (c) Licensees.--No person may hold more than one type of 27 license, directly or indirectly, or have any interest therein. 28 (d) Incentives.--A machine owner may not give and a licensed 29 establishment may not receive an incentive. A person who 30 violates this subsection commits a misdemeanor of the third 19890H1728B2118 - 10 -
1 degree and shall, upon conviction, be sentenced to pay a fine of 2 $1,000, or to imprisonment for not more than one year, or both. 3 Section 9. Distribution of proceeds. 4 (a) Collection.--Gross proceeds shall be collected by the 5 machine owner for each licensed video poker machine. 6 (b) Manner of distribution.--The net profits derived from a 7 video poker machine shall be distributed by the machine owner as 8 follows: 9 (1) Thirty percent to the machine owner. 10 (2) Twenty-five percent to the licensed establishment 11 where the machine is located. 12 (3) Twenty-five percent to the treasurer of the county 13 in which the machine is located for general county purposes. 14 (4) Twenty percent to local governments to be used for 15 property tax relief as set forth in section 10. 16 (c) Reports.--The machine owner shall make a report to the 17 county treasurer and the department each month with the 18 following information: 19 (1) Serial number of each video poker machine electronic 20 accounting device. 21 (2) Name and address of premises where machine is 22 located. 23 (3) Computer printout of the net profits of each machine 24 taken directly from the electronic accounting device. 25 Section 10. Local government revenues. 26 (a) Distribution.--The owner of each video poker machine 27 shall send a monthly report and the 20% of machine net profits 28 to the treasurer of the county where the machines are located to 29 be distributed to municipalities and school districts where the 30 machines are located within 30 days as follows: 19890H1728B2118 - 11 -
1 (1) Fifty percent to school districts. 2 (2) Fifty percent to municipalities. 3 (b) Purpose.--It is the intent of the General Assembly that 4 the moneys distributed under this section be used to reduce 5 property taxes. 6 Section 11. Cities of the first class. 7 (a) Manner of distribution.--The net profits derived from a 8 video poker machine in a city of the first class shall be 9 distributed as follows: 10 (1) Thirty percent to the machine owner. 11 (2) Twenty-five percent to the licensed establishment 12 where the machine is located. 13 (3) Twenty percent to the city for general purposes. 14 (4) Ten percent to the city for local tax relief. 15 (5) Ten percent to the school district for local tax 16 relief. 17 (6) Five percent for nonresident wage tax reduction. 18 (b) Collection.--Net profits shall be collected by the 19 machine owner for each licensed video poker machine. 20 (c) Reports.--The machine owner shall make a report to the 21 city treasurer and the department each month with the following 22 information: 23 (1) Serial number of each video poker machine electronic 24 accounting device. 25 (2) Name and address of premises where machine is 26 located. 27 (3) Computer printout of the net profits of each machine 28 taken directly from the electronic accounting device. 29 (d) Distribution.--The owner of each video poker machine 30 shall send a monthly report and the 50% of machine net profits 19890H1728B2118 - 12 -
1 to the city treasurer to be distributed within 30 days. 2 Section 12. Creation of account. 3 Revenues from licenses and fines under this act shall be 4 placed in a restricted revenue account to fund the operation of 5 the department as required by this act, including, but not 6 limited to, salaries and administrative expenses. The department 7 shall allocate a minimum of $1,000,000 annually to be used for 8 treatment of compulsive gamblers by Gamblers Anonymous in 9 accordance with regulations to be adopted by the department. 10 Section 13. Preemption of local taxes and license fees. 11 Video poker machines located in participating political 12 subdivisions shall be exempt from taxes levied under the act of 13 August 5, 1932 (Sp.Sess., P.L.45, No.45), referred to as the 14 Sterling Act, the act of December 31, 1965 (P.L.1257, No.511), 15 known as The Local Tax Enabling Act, or the act of April 13, 16 1972 (P.L.184, No.62), known as the Home Rule Charter and 17 Optional Plans Law. 18 Section 14. Existing machines. 19 Video poker machines manufactured and sold to machine owners 20 or distributors prior to the effective date of this act must 21 conform with or be made to conform with this act and the 22 regulations promulgated hereunder, in order to be licensed for 23 use in this Commonwealth. 24 Section 15. Penalty. 25 (a) Manufacture.--A person may not manufacture, assemble or 26 produce a video poker machine in this Commonwealth unless the 27 person has a valid manufacturer's license issued under section 28 8(a)(1). 29 (b) Distribution.--A person may not sell, distribute, lease 30 or market a video poker machine in this Commonwealth unless the 19890H1728B2118 - 13 -
1 person has a valid distributor's license issued under section 2 8(a)(2). 3 (c) Use.--A person may not offer, enable or allow the 4 playing of video poker at an establishment unless that 5 establishment has a valid licensed establishment license issued 6 under section 8(a)(4). A person with a valid licensed 7 establishment license may not have more than ten video poker 8 machines in a licensed establishment at the same time. No 9 licensee shall permit any customer to play a video poker machine 10 when said customer is visibly intoxicated. 11 (d) Tampering.--A person may not manipulate the outcome or 12 payoff of a video poker machine through interference with the 13 proper functioning of the mechanism. 14 (e) Classification.-- 15 (1) A person who violates this section commits a 16 misdemeanor of the third degree and shall, upon conviction, 17 be sentenced to pay a fine of $1,000, or to imprisonment for 18 not more than one year, or both. 19 (2) A person who violates this section a second time 20 commits a misdemeanor of the second degree and shall, upon 21 conviction, be sentenced to pay a fine of $2,000, or to 22 imprisonment for not more than two years, or both. 23 (3) A person who violates this section a third and 24 subsequent time commits a misdemeanor of the first degree and 25 shall, upon conviction, be sentenced to pay a fine of $5,000, 26 or to imprisonment for not more than five years, or both. 27 (4) Any person who violates this section shall be liable 28 to any persons on account of any damages incurred by them 29 resulting from any violation of this section. 30 Section 16. Exemption from State gambling laws. 19890H1728B2118 - 14 -
1 Video poker machines and their use are exempt from 18 Pa.C.S. 2 § 5513 (relating to gambling devices, gambling, etc). 3 Section 17. Exemption from Federal regulation. 4 The General Assembly declares that the Commonwealth is exempt 5 from section 2 of the Gambling Devices Transportation Act (64 6 Stat. 1134, 15 U.S.C. § 1172). Shipments of video devices into 7 this Commonwealth in compliance with sections 3 and 4 of the 8 Gambling Devices Transportation Act (64 Stat. 1134, 15 U.S.C. §§ 9 1173 and 1174) shall be deemed legal shipments into this 10 Commonwealth. 11 Section 18. Effective date. 12 This act shall take effect in 60 days. E19L04CHF/19890H1728B2118 - 15 -