Minnesota Charitable Gaming
Charitable, fraternal and other nonprofit associations were permitted to conduct bingo games provided the proceeds did not profit an individual of the organization. The organization was required to give at least 30 days' notice to the local municipality where the game was to be held, and the local government was authorized to prohibit bingo in its jurisdiction with passage of a local ordinance. Many of the fundamentals of this 1945 bingo law remain in today's Minnesota law: Bingo may still only be conducted by nonprofit organizations, individuals may not profit from the game, and local governments may still veto the game. A remarkable aspect of this law was its avoidance of the prohibition against lotteries adopted in the state's first constitution of 1858 by simply proclaiming bingo not to be a lottery, despite having the three factors – consideration, prize and chance – present in gambling.
In 1976, the legislature passed an extensive and comprehensive bingo law that was intended to be more exacting when defining the parameters under which bingo was conducted and which further regulated the use of bingo proceeds. For the first time, organizations were required to obtain a license from local governments and to report the disbursement of bingo proceeds to that agency. The law also required that an organization should designate a bingo manager who would be responsible for the operation of bingo and oversight of bingo financial accounts. Besides prizes, the cost of bingo operations was defined to be "reasonable and necessary" expenses such as supplies, equipment, rent and utilities. Net proceeds, gross receipts less costs, were required to benefit only religious, educational, charitable and patriotic purposes that contributed to worthwhile community projects. The restrictions on net proceeds were to ensure that individuals involved with bingo games did not benefit from them. Other modifications were that bingo prizes were limited to $100 per game, excluding high-stakes games; total prize awards for one bingo event could not be more than $2,500 and $3,000 for events offering a high-stakes game; organizations could only conduct at most two bingo events each week; and compensation was raised from $8 to $12 per event.
In 1978, the legislature added raffles, paddlewheels and tip boards as legal forms of charitable gaming. With the addition of these games, legislators intended to obtain regulatory control over the illegal operating of this type of gambling. Regulation for these new games was fundamentally the same as for bingo, with licensing still being handled at the local level.
In 1984, the legislature moved the regulation and licensing of charitable gaming from local governments to the state. A new 13-member Charitable Gambling Control Board (CGCB) was created for this purpose. For organizations to conduct charitable gambling, they were required to be licensed by the CGCB. Manufacturers and distributors of gambling equipment also needed to be licensed, and all gambling equipment was required to be registered with the CGCB.
Other substantial changes made to the charitable gaming laws that year were: The sales tax on charitable gambling gross receipts was replaced with a new tax of 10% of net gambling receipts, collected by the CGCB, which was an effective rate of 2% on gross receipts. At the request of Gov. Perpich, the tax originally benefited a state school of the arts, but within a year that distribution had been changed and the money was redirected to the state's general fund. Even though licensing and regulation were handed over to the state, local authorities still retained control over charitable gambling. All local governments had the authority to pass more rigorous gambling regulations than state regulations, including banning gambling altogether. CGCB licenses required the approval of the local municipality, and could be rejected by municipal officials.
In August 1988, to help alleviate the situation, the governor issued an executive order that moved the CGCB administrative functions to the Department of Revenue (DOR), leaving the CGCB with authority for issuing licenses. The move was designed to help ease the CGCB's workload.
In 1989, legislators responded by reorganizing the state's gambling control functions, creating a new Department of Gaming and bringing all disparate gaming functions, charitable gambling, pari-mutuel racing and the new state lottery under this new department. The CGCB was renamed the Gambling Control Board (GCB) and the sitting board was replaced with a new six-member board. The new GCB kept authority for implementation of rules; approval of gambling equipment; and the issuance of licenses for organizations, distributors, manufacturers and bingo halls. The DOR was responsible for the collection of gambling taxes and for performing gambling audits.
A bill was introduced in the 1989 session that would have authorized a pilot program to test up to 100 video pull-tab machines operated by charitable gambling organizations. Supporters claimed that the machines would be immeasurably more random than the boxes of paper pull-tabs being used and would eliminate skimming by reducing the number of people needing access to cash proceeds. Charitable organizations also hoped to increase their pull-tab receipts while reducing their expenses. The video pull-tab proposal failed in the 1989 session, but was reintroduced in 1990. The new proposal was endorsed for a three-year trial by the GCB and by a legislative task force that saw it as a way of dealing with charitable gambling abuses. Ultimately, the video pull-tab program failed again. However, video gaming as a state-approved gaming activity was not through. In the 1994 session, it returned as a proposal to put VLTs in bars and restaurants. The measure failed despite several revisions, and the legislature's advisory committee on gambling recommended against reviving the bill in 1995.
In the late 1990s through early 2000s, charitable organizations were the recipients of several tax relief bills that were enacted. In 1997, an organization's allowable expenses were increased to 65% of gross profit for bingo and 55% for all other types of games. In 1998, gambling taxes were reduced by 5%, and the following year, taxes were reduced by 5%. Again in 2000, there was an additional 5% reduction in charity game gambling taxes. In 2003, a new regulatory fee of 0.1% of gross receipts was assessed on licensed gambling organizations. The fee was to fund gambling regulation.
On 9 May 2012, the bill, HF2958, was passed by the legislature and signed by Gov. Mark Dayton on 14 May 2012. Referred to as the "Stadium Bill," the legislation authorized electronic pull-tabs and electronic linked bingo games to help fund the construction of a new Viking stadium planned for summer 2016. The games became effective on 1 July 2012. The electronic games have a tax rate of 8.5% of gross receipts, the same as other charity games, excepting bingo.
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