THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY P. COSTA, D. COSTA, DeLUCA, DERMODY, FRANKEL, KOTIK, MATZIE, PALLONE, WAGNER, BARRAR, BELFANTI, BRENNAN, BURNS, CALTAGIRONE, GRUCELA, HALUSKA, HARHAI, HARKINS, KULA, SAINATO, SEIP, SOLOBAY, STERN, WHITE AND MAHONEY, MAY 5, 2010

REFERRED TO COMMITTEE ON APPROPRIATIONS, MAY 5, 2010  

AN ACT

Amending Title 4 (Amusements) of the Pennsylvania Consolidated

Statutes, providing for video gaming.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Title 4 of the Pennsylvania Consolidated Statutes

is amended by adding a chapter to read:

CHAPTER 11A

VIDEO GAMING

Sec.

11A01.  Definitions.

11A02.  Powers and duties.

11A03.  Video gaming.

11A04.  Licensing of manufacturers, distributors and vendors.

11A05.  Licensed establishment license.

11A06.  Limitations on licensed establishments.

11A07.  Central communications system.

11A08.  Video gaming machine prototype.

11A09.  Fees.

11A10.  Unlawful use by minors.

11A11.  Inducements prohibited.

11A12.  Multiple types of licenses prohibited.

11A13.  Illegal activities.

11A14.  Establishment of account and distribution of funds.

11A15.  Preemption of local taxes and license fees.

11A16.  Exemption from State gaming laws.

11A17.  Exemption from Federal regulation.

§ 11A01.  Definitions.

The following words and phrases when used in this chapter

shall have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Account."  The Video Gaming Account established under

section 11A14 (relating to establishment of account and

distribution of funds).

"Coin-operated amusement machine."  A machine that requires

the insertion of a coin, currency or tokens to play or activate

a game, the outcome of which is primarily determined by the

skill of the player. The term does not include a video lottery

terminal.

"Department."  The Department of Revenue of the Commonwealth.

"Distributor."  Any individual, partnership, association or

corporation, licensed by the Department of Revenue to buy, sell,

service or distribute video gaming machines. The term does not

include a machine vendor or a manufacturer.

"Gaming machine."  A device or machine that has the outcome

of play primarily determined by chance. The term includes an

antique slot machine under 18 Pa.C.S. § 5513(c) (relating to

gambling devices, gambling, etc.) when used for profit. The term

shall not include any of the following:

(1)  A coin-operated amusement machine.

(2)  A video lottery terminal that has all of its seals

or identification plates.

(3)  Slot machines as defined under section 1103

(relating to definitions).

(4)  A game of chance under the act of December 19, 1988

(P.L.1262, No.156), known as the Local Option Small Games of

Chance Act.

(5)  Lottery terminals used under the act of August 26,

1971 (P.L.351, No.91), known as the State Lottery Law.

"Licensed establishment."  A restaurant, bar, tavern, hotel

or club that has a valid liquor or malt or brewed beverage

license under Article IV of the act of April 12, 1951 (P.L.90,

No.21), known as the Liquor Code.

"Machine vendor."  Any individual, partnership, association

or corporation that:

(1)  is licensed by the Department of Revenue; and

(2)  owns, services and maintains video gaming machines

for placement in licensed establishments.

"Manufacturer."  Any individual, partnership, association or

corporation that:

(1)  is licensed by the Department of Revenue; and

(2)  manufactures or assembles video gaming machines.

"Net profits."  All money put into a video gaming machine

minus the cash awards paid out to players.

"Service technician."  An individual holding a service

technician's license issued by the Department of Revenue

allowing the individual to service, maintain and repair video

gaming machines.

"State Lottery."  The lottery established and operated under

the act of August 26, 1971 (P.L.351, No.91), known as the State

Lottery Law.

"Video gaming machine."  A device or machine:

(1)  that, upon insertion of a coin or currency, will

play or simulate the play of a video poker, bingo, keno,

blackjack or any other game authorized by the Department of

Revenue;

(2)  that utilizes a video display and microprocessors;

and

(3)  in which, by the skill of the player or by chance,

the player may receive free games or credits that may be

redeemed for cash.

§ 11A02.  Powers and duties.

The department shall regulate and adopt standards for all

gaming activities in this Commonwealth, including video gaming

as authorized under this chapter.

§ 11A03.  Video gaming.

The department shall provide for video gaming at licensed

establishments. With the exception of tickets indicating credits

won, which are redeemable for cash, no machine may directly

dispense coins, cash, tokens or anything else of value.

§ 11A04.  Licensing of manufacturers, distributors and vendors.

(a)  Background investigation; application fee.--The

department shall have the Pennsylvania State Police conduct a

background investigation of an applicant for a manufacturer,

distributor or machine vendor license as to personal and

business character, honesty and integrity. An applicant must pay

a nonrefundable application fee of $5,000. The investigation may

utilize information on the applicant compiled by the

Pennsylvania Liquor Control Board. The investigation includes

the following:

(1)  An examination of criminal or civil records.

(2)  An examination of personal, financial or business

records. This paragraph includes tax returns, bank accounts,

business accounts, mortgages and contracts to which the

license applicant is a party or has an interest.

(3)  An examination of personal or business relationships

which:

(i)  include a partial ownership or voting interest

in a partnership, association or corporation; and

(ii)  bear on the fitness of the applicant for

licensure.

(b)  Production of information.--An applicant to become a

licensee must produce information, documentation and assurances

as required by the department. This subsection includes the

following:

(1)  Each license applicant must:

(i)  consent in writing to and provide for the

examination of financial and business accounts, bank

accounts, tax returns and related records in the

applicant's possession or under the applicant's control

that establish by clear and convincing evidence the

financial stability, integrity and responsibility of the

license applicant; and

(ii)  authorize all third parties in possession or

control of accounts or records under subparagraph (i) to

allow for their examination as deemed necessary by the

department in conducting background investigations.

(2)  Each license applicant must disclose on the

application form any criminal convictions for offenses graded

above summary offenses covering the ten-year period

immediately preceding the filing of the application. The

license applicant must also include on the application form

any convictions of the gambling laws of any jurisdiction.

(3)  If the license applicant has conducted a gaming

operation in a jurisdiction that permits such activity, the

license applicant must produce letters of reference from the

gaming or casino enforcement or control agency that specify

the experiences of the agency with the license applicant, the

license applicant's associates and the license applicant's

gaming operations. If the license applicant is unable to

obtain these letters within 60 days of the request, the

license applicant may submit a copy of the letter requesting

the information together with a statement under oath or

affirmation that, during the period activities were

conducted, the license applicant was in good standing with

the appropriate gambling or casino enforcement control

agency.

(4)  Each license applicant must provide information,

documentation and assurances as required by the department to

establish by clear and convincing evidence the license

applicant's good character, honesty and integrity.

Information under this paragraph may relate to family,

habits, character, reputation, business affairs, financial

affairs, business associates, professional associates and

personal associates, covering the ten-year period immediately

preceding the filing of the application.

(b.1)  Felony conviction prohibition.--A person that has been

convicted of a felony within ten years of the date of

application shall not be issued a license under this chapter.

(c)  Third-party disclosure.--Each license applicant must

accept any risk of adverse public notice, embarrassment,

criticism, damages or financial loss, which may result from

disclosure or publication by a third party of material or

information requested by the department pursuant to action on an

application. The license applicant expressly must waive a claim

against the department, executive director or the Commonwealth

and its employees from damages as a result of disclosure or

publication by a third party.

(d)  Hearing upon denial.--A person who is denied a license

has the right to a hearing before the department in accordance

with the provisions of 2 Pa.C.S. Chs. 5 Subch. A (relating to

practice and procedure of Commonwealth agencies) and 7 Subch. A

(relating to judicial review of Commonwealth agency action).

(e)  Sole proprietor vendors.--A sole proprietor vendor must

comply with all of the following:

(1)  Be a resident of this Commonwealth for at least two

years prior to application for a license.

(2)  Be of good moral character and reputation in the

community.

(3)  Be at least 18 years of age.

(4)  Be current in the payment of all taxes, interest and

penalties owed to the Commonwealth and political

subdivisions. This paragraph excludes items under formal

dispute or appeal under applicable law.

(5)  Demonstrate sufficient financial resources to

support the activities required to place and service video

gaming machines.

(f)  Partnership vendors.--Partnership vendors must comply

with all of the following:

(1)  Be current in the payment of taxes, interest and

penalties owed to the Commonwealth and political

subdivisions. This paragraph excludes items under formal

dispute or appeal under applicable law.

(2)  Demonstrate sufficient financial resources to

support the activities required to place and service video

gaming machines.

(3)  Have each partner be:

(i)  of good moral character and reputation in the

community;

(ii)  at least 18 years of age; and

(iii)  a resident of this Commonwealth for at least

two years prior to application for a license.

(4)  At all times subsequent to licensing, a majority of

the partnership ownership interest must be held by residents

of this Commonwealth.

(g)  Association and corporate vendors.--Association or

corporate vendors must comply with all of the following:

(1)  Be current in the payment of taxes, interest and

penalties owed to the Commonwealth and political

subdivisions. This paragraph excludes items under formal

dispute or appeal under applicable law.

(2)  Demonstrate sufficient financial resources to

support the activities required to place and service video

gaming machines.

(3)  Have each shareholder holding more than 10% of the

stock of a corporation be:

(i)  of good moral character and reputation in the

community;

(ii)   at least 18 years of age; and

(iii)  a resident of this Commonwealth for at least

two years prior to application.

(h)  Sole proprietor distributors.--A sole proprietor

distributor must comply with all of the following:

(1)  Be a resident of this Commonwealth for at least one

year prior to application.

(2)  Be of good moral character and reputation in the

community.

(3)  Be at least 18 years of age.

(4)  Be current in the payment of taxes, interest and

penalties owed to the Commonwealth and political

subdivisions. This paragraph excludes items under formal

dispute or appeal under applicable law.

(5)  Demonstrate sufficient financial resources to

support the activities required to sell and service video

gaming machines.

(i)  Partnership distributors.--Partnership distributors must

comply with all of the following:

(1)  Be current in the payment of taxes, interest and

penalties owed to the Commonwealth and political

subdivisions. This paragraph excludes items under formal

dispute or appeal under applicable law.

(2)  Demonstrate sufficient financial resources to

support the activities required to sell and service video

gaming machines.

(3)  Have each partner be:

(i)  of good moral character and reputation in the

community;

(ii)  at least 18 years of age; and

(iii)  a resident of this Commonwealth for at least

one year prior to application.

(4)  At all times subsequent to licensing, a majority of

the partnership ownership interest must be held by residents

of this Commonwealth.

(j)  Association and corporate distributors.--Association or

corporate distributors must comply with all of the following:

(1)  Be current in the payment of taxes, interest and

penalties owed to the Commonwealth and political

subdivisions. This paragraph excludes items under formal

dispute or appeal under applicable law.

(2)  Demonstrate sufficient financial resources to

support the activities required to sell and service video

gaming machines.

(3)  Have each shareholder holding more than 10% of the

stock of a corporation be:

(i)  of good moral character and reputation in the

community; and

(ii)  at least 18 years of age.

(4)  For at least one year immediately prior to

application, have maintained and operated a coin machine

distributorship office and sales staff within this

Commonwealth. This paragraph does not apply to an association

distributor.

(k)  Sole proprietor manufacturers.--A sole proprietor

manufacturer must comply with all of the following:

(1)  Be of good moral character and reputation in the

community.

(2)  Be at least 18 years of age.

(3)  Be current in the payment of taxes, interest and

penalties owed to the Commonwealth and political

subdivisions. This paragraph excludes items under formal

dispute or appeal under applicable law.

(4)  Demonstrate sufficient financial resources to

support the activities required to manufacture and sell video

gaming machines through a licensed distributor.

(l)  Partnership manufacturers.--Partnership manufacturers

must comply with all of the following:

(1)  Be current in the payment of taxes, interest and

penalties owed to the Commonwealth and political

subdivisions. This paragraph excludes items under formal

dispute or appeal under applicable law.

(2)  Demonstrate sufficient financial resources to

support the activities required to manufacture and sell video

gaming machines through a licensed distributor.

(3)  Have each partner be:

(i)  at least 18 years of age; and

(ii)  of good moral character and reputation in the

community.

(m)  Association and corporate manufacturers.--Association or

corporate manufacturers must comply with all of the following:

(1)  Be current in the payment of taxes, interest and

penalties owed to the Commonwealth and political

subdivisions. This paragraph excludes items under formal

dispute or appeal under applicable law.

(2)  Demonstrate sufficient financial resources to

support the activities required to manufacture and sell video

gaming machines through a licensed distributor.

(3)  Have each shareholder holding more than 10% of the

stock of the corporation or association be:

(i)  of good moral character and reputation in the

community; and

(ii)  at least 18 years of age.

(n)  Service technician.--A service technician must comply

with the following:

(1)  Be current in the payment of taxes, interest and

penalties owed to the Commonwealth and political

subdivisions. This paragraph excludes items under formal

dispute or appeal under applicable law.

(2)  Be of good moral character and reputation in the

community.

(3)  Be at least 18 years of age.

(o)  Written agreement.--Each licensed establishment shall

have a written agreement with a licensed machine vendor for a

minimum 12-month term. The agreement shall be approved by the

department and on file at the licensed establishment.

(p)  Nonaccessibility to minors.--No video gaming machine may

be in an area easily accessible to minors. A floor-to-ceiling

wall is not required, but the area must be secure and easily

seen and observed by the employees or management of the licensed

establishment.

(q)  Advertising prohibited.--No licensed establishment with

a video gaming license may advertise gaming in any form, written

or electronic, nor may its name include the words "casino,"

"gambling," "gaming" or any other term that may be interpreted

to advertise gaming.

§ 11A05.  Licensed establishment license.

The department shall issue a license to any licensed

establishment upon a showing that its liquor or retail dispenser

license is valid and is in good standing with the Pennsylvania

Liquor Control Board. The annual fee for a licensed

establishment shall be $500 per video gaming machine.

§ 11A06.  Limitations on licensed establishments.

(a)  Limitations.--Licensed establishments shall be subject

to the following limitations:

(1)  No licensed establishment may have more than five

video gaming machines. A licensed establishment which

requests a video gaming machine must receive one machine

before any other licensed establishment receives second or

subsequent machines.

(2)  No applicant may hold more than one type of license

authorized by this chapter.

(3)  Each licensee is responsible for payment of its

license fee. Payment of the fee by a person, partnership or

corporation other than the licensee is prohibited.

(b)  Unlawful acts.--No licensed establishment shall permit:

(1)  An individual under 21 years of age to operate or

attempt to operate a video gaming machine.

(2)  An individual under 21 years of age to receive or

attempt to receive a prize from a video gaming machine.

(3)  A visibly intoxicated person to play a video gaming

machine.

(4)  An individual to tamper with the connection of a

video gaming machine to the central computer.

In addition to any other penalties provided by law, a person who

violates paragraph (1), (2) or (3) commits a summary offense.

(c)  Seizure, forfeiture and destruction of gaming

machines.--Gaming machines shall be considered to be per se

illegal. Gaming machines and the proceeds therefrom may be

seized upon view as illegal contraband by agents of the

department and any other law enforcement agency. The owner of a

gaming machine shall have no right to compensation for the

seizure and destruction of a gaming machine or the proceeds of a

gaming machine.

(d)  Penalties.--

(1)  In the case of a gaming machine seized from a

licensed establishment, for a first violation, a penalty of

at least $1,000 and not more than $5,000 and a suspension of

the licensed establishment owner's liquor license for not

less than seven consecutive days, and for each subsequent

violation, a penalty of $15,000 and a suspension of the

liquor license for not less than 14 consecutive days.

(2)  In the case of a gaming machine seized from a place

of business other than a licensed establishment, for a first

violation, a penalty of at least $1,000 and not more than

$5,000 against the owner of the business from which the

gaming machine was seized, and for each subsequent violation,

a penalty of $15,000.

§ 11A07.  Central communications system.

The department shall establish and procure a central

communications system capable of monitoring and communicating

with each licensed video gaming machine. The department may, by

agreement between the department and the State Lottery, utilize

the central communications system utilized by the State Lottery.

All licensed video gaming machines must be linked to the central

communications system either at the department or, by agreement

between the department and the State Lottery, at the State

Lottery.

§ 11A08.  Video gaming machine prototype.

The department shall develop a prototype video gaming machine

that includes hardware and software specifications. These

specifications shall include:

(1)  All machines must have the ability to interact with

the central communications system.

(2)  Unremovable identification plates shall appear on

the exterior of the machine containing the name of the

manufacturer and the serial and model number of the machine.

(3)  Rules of play shall be displayed on the machine face

or screen as promulgated by the department.

(4)  A video gaming machine may not directly dispense

coins, cash, tokens or any other article of exchange or value

except for tickets. Such tickets shall be dispensed by

pressing the ticket-dispensing button on the machine at the

end of one's turn or play. The ticket shall indicate the

total amount of credits and the cash award, and the player

shall turn in this ticket to the appropriate person at the

licensed establishment to receive the cash award. The cost of

the credit shall be $.25, and the number of credits played

per game shall not exceed ten.

(5)  No cash award for any individual game may exceed

$1,000.

(6)  All video gaming machines must be designed and

manufactured with total accountability to include gross

proceeds, net profits, winning percentages and any other

information the department requires.

(7)  Each machine shall pay out a minimum of 85% of the

amount wagered.

(8)  The department may contract with the board to

develop and verify specifications for video gaming machines.

§ 11A09.  Fees.

(a)  Vendors license and fee.--The annual fee for a machine

vendor license shall be $25,000 for the first 50 video gaming

machines and an additional $500 per video gaming machine license

in excess of 50. A machine vendor license permits the vendor to

sell video gaming machines to another licensed machine vendor or

licensed distributor.

(b)  Distributor license fee.--The annual fee for a

distributor license shall be $25,000.

(c)  Manufacturer license fee.--The annual fee for a

manufacturer license shall be $25,000.

(d)  Service technician license fee.--The annual fee for a

service technician license shall be $100.

§ 11A10.  Unlawful use by minors.

(a)  Minors.--No individual under 21 years of age may use or

play a video gaming machine. An individual who violates this

subsection commits a summary offense.

(b)  Licensees.--

(1)  A licensed establishment may not, regardless of

knowledge or intent, permit an individual under 21 years of

age to play or use a video gaming machine.

(2)  A licensed establishment that violates this

subsection commits a misdemeanor of the second degree.

§ 11A11.  Inducements prohibited.

(a)  General rule.--A video gaming machine owner may not

offer or give any type of inducement or incentive to a licensed

establishment to secure a machine placement agreement.

(b)  Definition.--As used in this section, the term

"inducement" or "incentive" means consideration from a licensed

machine vendor to a licensed establishment owner as an

enticement to solicit or maintain the licensed establishment

owner's business. The term includes cash, gifts, loans and

prepayment of commissions.

§ 11A12.  Multiple types of licenses prohibited.

(a)  Manufacturer restriction.--A manufacturer may not be

licensed as a machine vendor or own, manage or control a

licensed establishment and shall be licensed only to sell to

licensed distributors.

(b)  Distributor restriction.--A licensed machine distributor

may not be licensed as a machine vendor or own, manage or

control a licensed establishment and shall only contract with

licensed machine vendors.

(c)  Vendor restriction.--A machine vendor may not be

licensed as a manufacturer or distributor or own, manage or

control a licensed establishment and shall be licensed only to

contract with licensed distributors and licensed establishments.

This shall not prohibit a licensed vendor from selling used

equipment to another licensed vendor.

(d)  Establishment owner restriction.--An owner of a licensed

establishment may not be licensed as a manufacturer, distributor

or vendor and shall only contract with a machine vendor to place

and service equipment.

§ 11A13.  Illegal activities.

A person may not sell, distribute, service, own, operate or

place on location a video gaming machine unless the person is

licensed under this chapter and is in compliance with all

requirements of this chapter.

§ 11A14.  Establishment of account and distribution of funds.

(a)  Video Gaming Account.--There is established a separate

account in the State Treasury to be known as the Video Gaming

Account. Fees and fines under this chapter and the portion of

net profits under subsection (b)(2)(iii) and (iv) shall be

deposited in the account.

(b)  Distribution of net profits.--

(1)  Net profits shall be calculated by subtracting cash

awards from the total consideration played on the machine.

(2)  The net profits from each video gaming machine shall

be distributed in the following manner:

(i)  30% to the licensed establishment.

(ii)  30% to the licensed vendor.

(iii)  38% to the account.

(iv)  2% to the Pennsylvania State Police.

(c)  Department funding.--The department shall derive all

funding for its operations related to the establishment,

enforcement and operation of video gaming from the account.

(d)  Payments to municipalities.--In addition to the funds

distributed under subsection (b)(2)(iv), the department shall

pay each municipality from the account $500 per licensed machine

located in the municipality.

(e)  Funds maintained in account.--An annual minimum balance

of $2,000,000 shall be maintained in the account. Money in

excess of this amount at the end of each fiscal year shall be

distributed to the Department of Transportation for highway

maintenance and/or projects.

(f)  Funding for compulsive gambling programs.--The

department shall allocate from the account at least $1,000,000

annually for the purpose of treating compulsive gambling in this

Commonwealth.

(g)  Continuous appropriation.--The money in the account is

continuously appropriated to the account and shall not lapse at

the end of any fiscal year.

§ 11A15.  Preemption of local taxes and license fees.

(a)  Statutes.--Video gaming machines shall be exempt from

taxes levied under the following:

(1)  The act of August 5, 1932 (Sp.Sess., P.L.45, No.45),

referred to as the Sterling Act.

(2)  The act of December 31, 1965 (P.L.1257, No.511),

known as The Local Tax Enabling Act.

(3)  53 Pa.C.S. Pt.III Subpt. E (relating to home rule

and optional plan government).

(4)  Any statute that confers taxing authority to a

political subdivision.

(b)  Licensing fees.--

(1)  Video gaming machines are exempt from local

licensing fees.

(2)  Local licensing fees imposed on all other coin-

operated amusement machines shall not exceed $150.

§ 11A16.  Exemption from State gaming laws.

Video gaming machines authorized under this chapter and their

use as authorized under this chapter are exempt from 18 Pa.C.S.

§ 5513 (relating to gambling devices, gambling, etc.).

§ 11A17.  Exemption from Federal regulation.

The General Assembly declares that the Commonwealth is exempt

from section 2 of the Gambling Devices Transportation Act (64

Stat. 1134, 15 U.S.C. § 1172). Shipments of approved video

gaming machines into this Commonwealth in compliance with

sections 3 and 4 of the Gambling Devices Transportation Act (64

Stat. 1134, 15 U.S.C. §§ 1173 and 1174) shall be deemed legal

shipments into this Commonwealth.

Section 2.  This act shall take effect in 60 days.