HOUSE BILL NO. 402

INTRODUCED BY R. JOHNSON

A BILL FOR AN ACT ENTITLED: "AN ACT AUTHORIZING THE DEPARTMENT OF JUSTICE TO OPERATE AND MAINTAIN AN AUTOMATED ACCOUNTING AND REPORTING SYSTEM FOR VIDEO GAMBLING MACHINES; ELIMINATING THE REQUIREMENT THAT MACHINE SPECIFICATIONS BE SUBSTANTIALLY THE SAME AS THE SPECIFICATIONS REQUIRED ON SEPTEMBER 30, 1989; ASSIGNING RESPONSIBILITY FOR PAYMENT OF MACHINE TAXES TO THE OWNER OF THE MACHINE; AUTHORIZING STATE PARTICIPATION IN LOANS TO MACHINE OWNERS TO COVER COSTS OF CONVERTING MACHINES TO THE AUTOMATED SYSTEM; PLEDGING AN AMOUNT OF THE STATE'S SHARE OF MACHINE TAX REVENUE TO GUARANTEE LOANS MADE TO MACHINE OWNERS WHO CONVERT MACHINES TO THE AUTOMATED SYSTEM; PROVIDING AN APPROPRIATION; AMENDING SECTIONS 23-5-116, 23-5-602, 23-5-610, AND 23-5-621, MCA; AND PROVIDING EFFECTIVE DATES AND A TERMINATION DATE."

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:

NEW SECTION. Section 1. Automated accounting and reporting system. (1) For the purposes of performing its duties under this chapter, minimizing regulatory costs, simplifying the reporting of video gambling machine revenue data, preserving the integrity of video gambling machines within its jurisdiction, lessening administrative and recordkeeping burdens for licensed machine owners, licensed operators, and the department, and enhancing the management tools available to the industry and the state, the department may operate and maintain, subject to the restrictions contained in subsections (3) and (4), an automated accounting and reporting system for video gambling machines.

(2) Except as provided in subsection (3), licensed machine owners and licensed operators shall participate in the automated accounting and reporting system, and each video gambling machine for which a permit has been issued under this part must be connected to the automated accounting and reporting system within the time required by the department.

(3) The provisions of subsection (2) do not apply to a premises on which there are located five or fewer video gambling machines if the video gambling machines are owned by the licensed operator.

(4) (a) The department shall issue a request for proposals for the automated accounting and reporting system on or before September 1, 1999.

(b) A request for proposals for an automated accounting and reporting system must require that the proposal:

(i) provide that communication protocols between connected video gambling machines and the central system and between connected video gambling machines and on-premises site controllers do not favor any one central system vendor or component manufacturer; and

(ii) provide for computer backup and contingency planning to ensure that there will be no video gambling machine operation interruptions because of central system failures.

NEW SECTION. Section 2. Loans to video gambling machine owners. (1) A licensed machine owner of a video gambling machine who incurs actual hardware or software costs for conversion of a video gambling machine to make it compatible with the automatic accounting and reporting system authorized by [section 1] is eligible for loan assistance pursuant to Title 17, chapter 6, part 3, to cover the actual costs of conversion, not to exceed $250 for each video gambling machine, if:

(a) the permit for the video gambling machine was active on December 31, 2000;

(b) the department determines that the video gambling machine is incapable, in the form in which it was approved by the department, of communicating with the automated accounting and reporting system authorized by [section 1];

(c) the licensed machine owner participates in the automated accounting and reporting system and incurs actual hardware or software costs prior to December 31, 2003, for conversion of the video gambling machine to make it compatible with the automated accounting and reporting system; and

(d) the licensed machine owner meets all other eligibility criteria required by the lending institution.

(2) The total amount of loans participated in by the state under this section may not exceed $3.6 million.

Section 3. Section 23-5-116, MCA, is amended to read:

"23-5-116. Disclosure of information. (1) The department shall, upon request, disclose the following information from a license or permit application:

(a) the applicant's name;

(b) the address of the business where the activity under the license or permit is to be conducted;

(c) the name of each person who has an ownership interest in the business; and

(d) the types of permits requested by the applicant.

(2) The department shall, upon request, disclose:

(a) public criminal justice information, as defined in 44-5-103, as required by 44-5-301;

(b) all records and other information, except confidential criminal justice information, as defined in 44-5-103, that relates to:

(i) a sanction imposed under 23-5-136, for a violation of this chapter or a department rule; or

(ii) any other civil or administrative sanction or penalty imposed under a provision of this chapter or a department rule for a violation of this chapter or a department rule.

(3) In addition to the information enumerated in subsections (1) and (2), the department may disclose any other relevant information obtained in the application or tax reporting process or as a result of other department operations to:

(a) a federal, state, city, county, or tribal criminal justice agency;

(b) the department of revenue and the federal internal revenue service; and

(c) a gambling regulatory agency of another state, a local government unit of another state, a tribal government, or a foreign nation, provided that the disclosure of the information complies with the law of that jurisdiction and that the receiving entity has been approved for receipt by the Montana attorney general.

(4) In the event of a tax delinquency or at the request of a video gambling machine permitholder, the department shall inform the permitholder of the status of a licensed machine owner's tax payments for a video gambling machine located at the permitholder's place of business."

Section 4. Section 23-5-602, MCA, is amended to read:

"23-5-602. Definitions. As used in this part, the following definitions apply:

(1) "Associated equipment" means all proprietary devices, machines, or parts used in the manufacture or maintenance of a video gambling machine, including but not limited to integrated circuit chips, printed wired assembly, printed wired boards, printing mechanisms, video display monitors, metering devices, and cabinetry.

(2) "Bingo machine" means an electronic video gambling machine that, upon insertion of cash, is available to play bingo as defined by rules of the department. The machine uses a video display and microprocessors in which, by the skill of the player, by chance, or by both, the player may receive free games or credits that may be redeemed for cash. The term does not include a slot machine or a machine that directly dispenses coins, cash, tokens, or anything else of value.

(3) "Draw poker machine" means an electronic video gambling machine that, upon insertion of cash, is available to play or simulate the play of the game of draw poker as defined by rules of the department. The machine uses a video display and microprocessors in which, by the skill of the player, by chance, or by both, the player may receive free games or credits that may be redeemed for cash. The term does not include a slot machine or a machine that directly dispenses coins, cash, tokens, or anything else of value.

(4) "Gross income" means money put into a video gambling machine minus credits paid out in cash.

(5) "Keno machine" means an electronic video gambling machine that, upon insertion of cash, is available to play keno as defined by rules of the department. The machine uses a video display and microprocessors in which, by the skill of the player, by chance, or by both, the player may receive free games or credits that may be redeemed for cash. The term does not include a slot machine or a machine that directly dispenses coins, cash, tokens, or anything else of value.

(6) "Licensed machine owner" means a licensed operator or route operator who owns a video gambling machine for which a permit has been issued by the department.

(7) "Permitholder" means a licensed operator on whose premises is located one or more video gambling machines for which a permit has been issued by the department."

Section 5. Section 23-5-610, MCA, is amended to read:

"23-5-610. Video gambling machine gross income tax -- records -- distribution -- quarterly statement and payment. (1) A licensed machine owner shall pay to the department a video gambling machine tax of 15% of the gross income from each video gambling machine issued a permit under this part. A licensed machine owner may deduct from the gross income amounts equal to amounts stolen from video gambling machines if the amounts stolen are not repaid by insurance or under a court order, if a law enforcement agency investigated the theft, and if the theft is the result of either unauthorized entry and physical removal of the money from the video gambling machines or of video gambling machine tampering and the amounts stolen are documented.

(2) A licensed machine owner shall keep a record of the gross income from each video gambling machine issued a permit under this part in the form the department requires. The records must at all times during the business hours of the licensee be subject to inspection by the department.

(3) (a) For each video gambling machine issued a permit under this part that is not connected to the automated accounting and reporting system established under [section 1], the licensed machine owner shall, within 15 days after the end of each quarter and in the manner prescribed by the department, complete and deliver to the department a statement showing the total gross income , together with the total amount due the state as video gambling machine gross income tax for the preceding quarter. The statement must contain other relevant information that the department requires.

(b) For each video gambling machine that is connected to the department's automated accounting and reporting system, the department shall, within 5 working days after the end of each quarter, complete and deliver to each licensed machine owner (with a copy sent to the licensed operator on whose premises the video gambling machines were placed) a statement showing the total gross income from each video gambling machine issued a permit under this part, together with the total amount due the state as video gambling machine gross income tax for the preceding quarter. A licensed machine owner shall remit the total amount due the state under this subsection (3) within 25 days after the end of each quarter.

(4) (a) Except as provided in subsection (5), the department shall, in accordance with the provisions of 15-1-501, forward one-third of the tax collected under subsection (3) to the general fund.

(b) The department shall, in accordance with the provisions of 15-1-501, forward the remaining two-thirds of the tax collected under subsection (3) to the treasurer of the county or the clerk, finance officer, or treasurer of the city or town in which the licensed video gambling machine is located, for deposit to the county or municipal treasury. Counties are not entitled to proceeds from taxes on income from video gambling machines located in incorporated cities and towns. The two-thirds local government portion of tax collected under subsection (3) is statutorily appropriated, as provided in 17-7-502, to the department for deposit to the county or municipal treasury.

(5) Receipts from the state's share of taxes collected under this section are pledged and dedicated to guarantee repayment of loans authorized by [section 2] in an amount sufficient to meet the repayment obligation for the fiscal year during which the loans are made. The amount of taxes pledged by this subsection is the dollar amount of loans made under [section 2] and must be allocated to a separate account in the pooled investment fund provided for in 17-6-203. The board of investments is not entitled to use the proceeds from taxes collected under this section to repay a loan made under [section 2] unless the board certifies that all other commercially available means of collection on the loan have been exhausted."

Section 6. Section 23-5-610, MCA, is amended to read:

"23-5-610. Video gambling machine gross income tax -- records -- distribution -- quarterly statement and payment. (1) A licensed machine owner shall pay to the department a video gambling machine tax of 15% of the gross income from each video gambling machine issued a permit under this part. A licensed machine owner may deduct from the gross income amounts equal to amounts stolen from video gambling machines if the amounts stolen are not repaid by insurance or under a court order, if a law enforcement agency investigated the theft, and if the theft is the result of either unauthorized entry and physical removal of the money from the video gambling machines or of video gambling machine tampering and the amounts stolen are documented.

(2) A licensed machine owner shall keep a record of the gross income from each video gambling machine issued a permit under this part in the form the department requires. The records must at all times during the business hours of the licensee be subject to inspection by the department.

(3) (a) For each video gambling machine issued a permit under this part that is not connected to the automated accounting and reporting system established under [section 1], the licensed machine owner shall, within 15 days after the end of each quarter and in the manner prescribed by the department, complete and deliver to the department a statement showing the total gross income , together with the total amount due the state as video gambling machine gross income tax for the preceding quarter. The statement must contain other relevant information that the department requires.

(b) For each video gambling machine that is connected to the department's automated accounting and reporting system, the department shall, within 5 working days after the end of each quarter, complete and deliver to each licensed machine owner (with a copy sent to the licensed operator on whose premises the video gambling machines were placed) a statement showing the total gross income from each video gambling machine issued a permit under this part, together with the total amount due the state as video gambling machine gross income tax for the preceding quarter. A licensed machine owner shall remit the total amount due the state under this subsection (3) within 25 days after the end of each quarter.

(4) (a) The department shall, in accordance with the provisions of 15-1-501, forward one-third of the tax collected under subsection (3) to the general fund.

(b) The department shall, in accordance with the provisions of 15-1-501, forward the remaining two-thirds of the tax collected under subsection (3) to the treasurer of the county or the clerk, finance officer, or treasurer of the city or town in which the licensed video gambling machine is located, for deposit to the county or municipal treasury. Counties are not entitled to proceeds from taxes on income from video gambling machines located in incorporated cities and towns. The two-thirds local government portion of tax collected under subsection (3) is statutorily appropriated, as provided in 17-7-502, to the department for deposit to the county or municipal treasury."

Section 7. Section 23-5-621, MCA, is amended to read:

"23-5-621. Rules. (1) The department shall adopt rules that:

(a) describe the video gambling machines authorized by this part and state the specifications for video gambling machines authorized by this part ;

(b) allow video gambling machines to be imported into this state and used for the purposes of trade shows, exhibitions, and similar activities;

(c) implement the automated accounting and reporting system authorized by [section 1] and prescribe the time within which video gambling machines must be connected to the automated accounting and reporting system;

(d) allow each video gambling machine connected to the automated accounting and reporting system to offer any combination of approved poker, keno, and bingo games within the same video gambling machine cabinet;

(e) allow, on an individual license basis, licensed machine owners and licensed operators of video gambling machines connected to the automated accounting and reporting system to:

(i) electronically acquire and use for an individually licensed premises the information and data collected by the department for business management, accounting, and payroll purposes; however, the rules must specify that the data made available as a result of the automated accounting and reporting system may not be used by a licensee for player tracking purposes; and

(ii) acquire and use, at the expense of a licensee, a department-approved site controller;

(f) provide that, for video gambling machines connected to the automated accounting and reporting system, video gambling machine paper audit and accounting rolls need not be retained for more than 4 consecutive quarters; and

(g) minimize, whenever possible, the recordkeeping and retention requirements for video gambling machines that are connected to the automated accounting and reporting system.

(2) The department's rules for an automated accounting and reporting system must, at a minimum:

(a) provide for confidentiality of information received through the automated accounting and reporting system within the limits prescribed by 23-5-115(6) and 23-5-116;

(b) prescribe specifications for maintaining the security and integrity of the automated accounting and reporting system;

(c) limit and prescribe the circumstances for electronic issuance of video gambling machine permits and electronic transfer of funds for payment of taxes, fees, or penalties to the department based on the requirement that electronic permitting and transfer of funds may be done only when the department has a request in writing from the owner of the electronic funds transfer account; and

(d) limit and prescribe the circumstances under which video gambling machines may be disabled for malfunctions or violations detected by use of the automated accounting and reporting system or other violations of this chapter. A machine connected to the automated accounting and reporting system may not be disabled for violations except upon clear and convincing evidence supporting a determination made after notice and an opportunity for hearing and with the right of judicial review under the Montana Administrative Procedure Act."

NEW SECTION. Section 8. Appropriation. For the fiscal biennium beginning July 1, 1999, there is appropriated from the state special revenue gambling licensee fee account, provided for in 23-5-612, and the general fund $1,234,474 to be used by the department of justice to establish and maintain the automated accounting and reporting system authorized by [section 1]. To the extent that funds are available in the fee account in addition to funds to be used for all other purposes provided by law, the department shall first use the funds in the fee account prior to using general fund money.

NEW SECTION. Section 9. Codification instruction. [Sections 1 and 2] are intended to be codified as an integral part of Title 23, chapter 5, part 6, and the provisions of Title 23 apply to [sections 1 and 2].

NEW SECTION. Section 10. Coordination instruction. If House Bill No. 109 and [this act] are passed and approved, if House Bill No. 109 includes a provision allowing voluntary participation in the automated accounting and reporting system, and if the department of justice has not received by July 1, 1999, written confirmation from licensed machine owners covering the percentage required by House Bill No. 109 of the total number of video gambling machines capable of being connected to the automated system, then House Bill No. 109 is void.

NEW SECTION. Section 11. Effective dates. (1) [Sections 1, 2, 7 through 10, and 12 and this section] are effective on passage and approval.

(2) [Sections 3 through 5] are effective July 1, 1999.

(3) [Section 6] is effective January 1, 2006.

NEW SECTION. Section 12. Termination. [Sections 2 and 5] terminate December 31, 2005.

- END -