S.F. No. 2391 (Third Engrossment) provides for a new NFL stadium in Minneapolis. The bill establishes the Minnesota Sports Authority. The bill provides for state and local funding for the stadium.  Electronic pull-tabs and bingo are authorized.  Racinos are authorized.

ARTICLE 1.  MINNESOTA STADIUM AUTHORITY

Sections 1 [Financial audits] and 2 [Minnesota Sports Facilities Authority] provide that the Minnesota Stadium Authority (“Authority”) shall be audited by the legislative auditor.  The Authority must pay for the audit.

Section 3 [Public official] includes members or the chief executive of the Authority in the definition of “public official” for purposes of campaign finance and public disclosure laws.

Section 4 [Employees] includes employees of the Minnesota Sports Facilities Authority in the Minnesota State Retirement System.

Section 5 [Purpose] states the purpose of the new chapter relating to the stadium is to provide for the construction, financing, and long-term use of a stadium and related infrastructure as a venue for professional football and a broad range of other activities. The expenditure of public money and property acquired for the stadium are declared to serve a public purpose. Because of the unique public purpose of the stadium and the related contracts, the courts are charged with protecting those benefits, if necessary, by the use of specific performance and injunctive relief.

Section 6 [Definitions] provides definitions for the bill.

Section 7 [Sports Facilities Authority], subdivision 1 establishes the Minnesota Sports Facilities Authority as a public body and political subdivision of the state.

Subdivision 2 provides that the Authority consists of five members. The chair and two members are appointed by the Governor.  The mayor of Minneapolis appoints the other two members; members are not required to live in the city and may be appointed officials of a political subdivision. All members serve staggered terms.

Subdivision 3 allows the Authority to compensate its members, other than the chair, according to the laws governing administrative boards and agencies. The chair shall receive a fixed salary.

Subdivision 4 requires the chair to preside at all meetings and perform all other assigned duties and functions. The Authority may appoint a vice-chair and other necessary officers.

Subdivision 5 provides that a member, other than the chair, may only be removed by the appointing Authority for misfeasance, malfeasance, or nonfeasance.

Subdivision 6 requires the Authority to adopt bylaws to establish the rules of procedure, the powers and duties of its officers, and other matters related to the governance of the Authority.

Subdivision 7 requires the legislative auditor to audit the books and accounts of the Authority annually. The Authority shall pay the cost of the audit.

Subdivision 8 allows the Authority to appoint an executive director to serve as its chief executive officer. The executive director has the authority and duties prescribed by law and the Authority.

Subdivision 9 requires the Authority to establish a Web site to provide information to the public about actions taken by the Authority.

Subdivision 10 provides that any three members of the Authority constitute a quorum. During the design and construction stages of the stadium, a four-fifths vote of the Authority is required for specified decisions.

Section 8 [Sports Facilities of the Authority] describes the sports facilities that the Authority controls, operates, and has responsibility over.  The football stadium and other facilities constructed or acquired by the authority are part of the authority. The Target Center, Xcel Energy Center, and Target Field may join the authority if the specified requirements are met.

Section 9 [Location] requires the stadium to be constructed at the current stadium site in Minneapolis.

Section 10 [Powers; duties of the Authority], subdivision 1 allows the Authority to sue and be sued. The Authority is a public body and the stadium and related infrastructure are public improvements for specified purposes. The Authority is a municipality for stated purposes.

Subdivision 2 allows the Authority to acquire all necessary right, title, and interests to necessary property. The Authority may acquire land by condemnation.

Subdivision 3 allows the Authority to sell, lease, or otherwise dispose of property that is no longer needed. The property may be sold after notice and a hearing when practical. The Authority cannot sell or transfer title to the stadium unless authorized by the Legislature.

Subdivision 4 subjects the Authority to the open meeting statutes and the Minnesota Government Data Practices Act.

Subdivision 5 allows the Authority to operate the stadium and related infrastructures and facilities. The Authority may delegate the ability to operate the stadium to the NFL team or other party.

Subdivision 6 allows the Authority to employ persons and contract for services. The Authority must enter into an agreement with the city regarding traffic control for the stadium.

Subdivision 7 allows the Authority to accept money, property, services, and grants or loans from another governmental entity or any person. The Authority must use the money, property, or services according to the terms of any contribution, grant, loan, or agreement.

Subdivision 8 allows the Authority to enter into use agreements or leases for the use, occupation, and availability of all, or part, of the Authority’s property for specified purposes.  The lease or use agreement with an NFL team must require the NFL team to pay an agreed-upon portion of operating and maintenance costs and expenses. No lease or use agreement may permit smoking in the stadium.

Subdivision 9 allows the Authority to conduct research, prepare reports, and conduct all necessary hearings and investigations in connection with its functions.

Subdivision 10 authorizes the Authority to require an employee to obtain and file a bond or fidelity insurance policy. The Authority may obtain insurance to protect itself against liability.

Subdivision 11 exempts the acquisition and betterment of a stadium and its infrastructure from Metropolitan Council review and the Business Subsidy Act.

Subdivision 12 gives the Authority all other powers necessary or incidental to the powers expressly granted.

Subdivision 13 requires the NFL team to transfer each year from 2016 to 2020 to the Authority amounts equal to the city's share of operating costs and capital reserves.  The city or state must repay the NFL team.

Subdivision 14 requires the Authority to annually report to the legislature on specified issues.

Section 11 [Stadium design and construction], subdivision 1 requires the Authority and NFL team to establish a process to reach consensus on key elements of stadium design, development, and construction.  Unless otherwise agreed, the Authority shall create a group to manage the design and oversee construction of the stadium.  An administration agreement between the team and Authority will establish minimum design standards and the rights and responsibilities of the Authority, team, the design and construction group, and the team owner’s representative for design and construction. 

The Authority may authorize the team to oversee construction of the stadium, in which case the team assumes the role and responsibility of the Authority for completing construction according to the agreed-upon minimum design standards.  The Authority and NFL team must follow the outlined request for proposals process.  The Authority and NFL team must require the construction or program manager to certify a fixed construction price and completion date. 

Subdivision 2 provides that, unless otherwise agreed, a party that requests a change in minimum design standards that increases costs must pay for the associated cost overruns or associated liabilities.

Subdivision 3 requires the stadium and related infrastructure be designed and constructed to incorporate the following general program and design elements: 1) the stadium will be approximately 1,500,000 square feet with approximately 65,000 seats (expandable to 72,000), 150 suites, and 7,500 club seats; 2) space for NFL team-related exhibitions and sales, retail venues, and concessions and restaurants;  3) year-round space for the NFL team administrative operations, sales, and marketing; 4) space for administrative offices of the Authority; 5) 2,000 parking spaces within one block of the stadium and 500 parking spaces within 2 blocks; 6) elements sufficient to provide community and civic uses; and 7) a roof that is fixed or retractable.

Subdivision 4 allows the Authority to accept financial obligations relating to cost overruns associated with acquisition of the stadium site, infrastructure, design, development, and construction, except that the Authority must not accept responsibility for cost overruns if the Authority has authorized the NFL team to manage the construction of the stadium. Cost savings or additional funds may be used first to fund additional stadium or infrastructure, and then to fund the capital reserves.

Section 12 [Commemorative bricks] requires the Authority to sell tax deductible commemorative bricks to be prominently displayed at the stadium. Funds raised by this section are appropriated to the Commissioner of Management and Budget for a grant to the Authority.

Section 13 [Employment], subdivision 1 requires the Authority to make every effort to employ a construction manager, subcontractors, vendors, and concessionaires to employ women and members of minority communities when hiring.  The Authority must contract with an employment program to recruit, hire, and retain minorities for the stadium facilities. 

Subdivision 2 requires the NFL team or the Authority to give workers presently employed by the NFL team or the Minnesota Sports Facilities Commission or its vendors at the existing football stadium the opportunity to continue their employment in comparable positions at the new stadium. Workers represented under a collective bargaining agreement may continue the same representation or designate another collective bargaining unit as their representative.  Volunteers cannot be prohibited from working at non-NFL events.

Section 14 [Stadium operations; capital improvements], subdivision 1 requires the stadium to be operated in a first-class manner. The Authority and the team must mutually agree on a third-party management company or individual to manage the stadium and on major vendors to the stadium. The Authority, with approval from the NFL team, may enter into agreements with a program manager for management of the stadium, for a maximum of 40 years.

Subdivision 2 requires the Authority to pay all operating expenses of the stadium.  The Authority must require the NFL team to pay the Authority a specified amount towards the operating costs of the stadium.  The state shall repay some of the costs to the NFL team.  The Authority may establish an operating reserve to cover operating expense shortfalls.

Subdivision 3 requires the Authority to work to maximize access for public and amateur sports, community, and civic events, and other public events similar to those being held in the existing stadium. 

Subdivision 4 requires the Authority to establish a capital reserve fund.  The Authority is responsible for making repairs and improvements to the stadium.  The NFL team and the state must each contribute $1,500,000 each year during the lease or use agreement to the operating reserve fund.  Requires the state contribution to be assumed by the team from 2016 to 2020 and be repaid to the team using state funds.  The Authority, with NFL team input, must develop short-term and long-term capital funding plans.

Subdivision 5 requires the NFL team to pay all game day expenses in the stadium, in addition to operating expense contributions.

Subdivision 6 requires the Authority to cooperate with the NFL team to facilitate the financing of the NFL team’s contribution, but the Authority is not required to incur additional costs or provide conduit financing.

Section 15 [Criteria and conditions], subdivision 1 requires the Authority to follow and enforce the specified criteria and conditions in developing the stadium and entering into contracts.

Subdivision 2 provides that the NFL team contribution is at least $427,000,000.  The team must provide the first $50,000,000, then the state contributes the next $50,000,000.  After that, contributions from the NFL team and the state will be proportionate to their remaining funding commitments.

Subdivision 3 requires the Authority to enter into a long-term lease or use agreement with the NFL team for the team’s use of the stadium. The lease or use agreement must be for 40 years, with the option to extend the length. The NFL team must agree to play all preseason, regular season, and postseason home games at the stadium. Training facilities must remain in the state during the term of lease or use agreement. The lease or use agreement must include terms for default, termination, and breach of the agreement. The lease or use agreement must provide for specific performance and injunctive relief. The NFL team must not enter into or accept any agreement or requirement inconsistent with this 40 year commitment.

Subdivision 4 requires that a lease or use agreement to include rent and other fees and expenses to be paid by the NFL team. The NFL team shall receive all game day revenues. The NFL team retains naming rights to the stadium, subject to approval of the name by the Authority. The Authority receives all general ticket revenues and other event revenues other than from NFL games, NFL team owned major league soccer games, and other NFL team events agreed to by the Authority.

Subdivision 5 requires that during the 40 year lease or use agreement term, the NFL team must give written notice to the Authority more than 180 days prior to any action that would result in a breach or default of a provision of the lease or use agreement. The Authority or the state may seek enforcement of the lease or use agreement.

Subdivision 6 requires the Authority to determine, before construction begins, that all public and private funding sources are included in written agreements. The NFL team must provide the Authority access to its financial or other information to help the Authority make the determination.

Subdivision 7 requires the Authority to generally comply with all environmental requirements imposed by regulatory agencies for the stadium, site, and structure.

Subdivision 8 provides that if the NFL team is sold, a specified portion of the sale price must be paid to the Authority and deposited in a reserve fund for improvements to the stadium.

Subdivision 9 requires the Authority and the NFL team to agree to a notice provision for a material breach. In the event of a material breach by the NFL team, the lease or use agreement must provide the Authority access to audited financial statements of the NFL team and other necessary financial information to enforce the terms of the lease or use agreement.

Subdivision 10 requires the lease or use agreement to include a provision that the NFL team or NFL will transfer to the state the Vikings’ heritage and records if the NFL team is in violation of the lease or use agreement.

Subdivision 11 provides that the Authority and NFL team will build a stadium that is environmentally and energy efficient. The Authority and NFL team will strive to make the stadium design architecturally significant. The Authority and team must ensure that the stadium be constructed with steel made in USA.

Subdivision 12 requires the Authority and NFL team to secure any necessary approvals to the terms of the lease or use agreement and the design and construction plans for the stadium, including prior approval of the NFL.

Subdivision 13 requires the lease or use agreement to provide for affordable tickets to professional sporting events held in the stadium.

Subdivision 14 requires the Authority to own and retain the exclusive right to sell the stadium builder’s licenses in the stadium. The Authority will retain the NFL team to act as the Authority’s agent in the marketing and selling of such licenses.

Subdivision 15 requires the Authority to grant the NFL team the exclusive right to establish major league soccer at the stadium for five years. The Authority and the NFL team may enter into an agreement providing the terms and conditions of such an arrangement provided certain requirements are met.

Subdivision 16 provides that, subject to prior approval of the Authority, any obligations by the NFL team may be performed by the team, a related entity, a third party, or other specified entities.

Section 16 [Municipal activities], subdivision 1 allows Minneapolis to acquire property interests in the development area for the stadium site and stadium infrastructure. The city may convey the property to the Authority with or without consideration. The city may prepare a site for development as a stadium and acquire and construct any stadium-related infrastructure.

Subdivision 2 provides that the city has no interest in or claim to any assets or revenues of the Authority, unless otherwise agreed.

Subdivision 3 names the Authority as the responsible governmental unit (“RGU”) for an environmental impact statement (“EIS”), if one is necessary. An EIS shall not be required to consider alternative stadium sites. The EIS must be determined to be adequate before commencing work on the foundation of the stadium.

Subdivision 4 allows the city to make expenditures or grants for purposes of this bill. The city may reimburse any entity that has granted, loaned, or advanced funds to the city.

Subdivision 5 expresses the Legislature’s intent that the city may acquire and develop stadium infrastructure, enter into contracts with the Authority and other governmental or nongovernmental entities, appropriate funds, and make employees, consultants, and other resources available for this purpose.

Subdivision 6 finds it necessary to establish an alternative process for municipal land use and development review to accomplish the objectives of the act in the required time frame. The legislature finds and declares that the construction of a stadium within the development area is consistent with the adopted area plan, is the preferred stadium location, and is a permitted land use. The city must establish a stadium implementation committee to make recommendations on the design plans submitted for the stadium and related infrastructure and improvements. The recommendations are forwarded to the Minneapolis Planning Commission for an advisory recommendation, and then to the city council for final action.  The city council must not impose unreasonable conditions on the recommendations of the implementation committee nor impose any conditions or take any actions that will result in a delay of the planning and construction timetable or in additional overall costs. Failure of the city to act within the specified time is deemed to be approval. The Authority may seek a review of city council actions in district court.

Section 17 [Local taxes] prohibits new or additional local sales or use taxes from being imposed on sales at the stadium or ticket sales, unless the tax is applicable throughout the taxing jurisdiction.

Section 18 [Metropolitan Sports Facilities Commission] abolishes the Metropolitan Sports Facilities Commission (“Commission”). The Commission must pay the operating expenses of the Authority until the commission is abolished.  The Commission must pay its outstanding obligations, settle its accounts, and transfer its remaining assets, liabilities, and obligations to the Authority.  Once the transfer is complete the Commission is abolished.  All Commission employees must be transferred to the Authority without loss of right or privilege.

Section 19 provides that this article is effective the day following final enactment unless otherwise provided.

ARTICLE 2.  STATE STADIUM FUNDING

Section 1 [Stadium Appropriation Bonds], subdivision 1 defines an appropriation bond as an instrument of the state payable from specified sources including money appropriated from the general fund.  Defines debt service as the amount payable of principal, premium, and interest on appropriation bonds.

Subdivision 2, paragraph (a) authorizes the Commissioner of Management and Budget to sell and issue appropriation bonds of the state for the public purpose of financing the stadium project of the Minnesota Sports Facilities Authority as provided by chapter 473J.  Requires that bond proceeds and any net income from investment of the proceeds be appropriated to the bond proceeds fund in the state treasury.

Paragraph (b) authorizes the Commissioner to sell appropriation bonds to net $548 million provided that the bonds issued and unpaid not exceed $650 million.

Paragraph (c) allows the Commissioner the authority to issue a series of one or more bonds up to the amounts in paragraph (b).  Limits the term on any series of appropriation bonds to 30 years.  Taxable or tax-exempt bond may be issued.

Paragraph (d) authorizes the Commissioner to enter into certain agreements relating to the bonds.

Paragraph (e) allows the Commissioner to enter into agreements or contracts relating to the disclosure of information consistent with federal rules and regulations.

Paragraph (f) provides that the bonds are not subject to Chapter 16C (state procurement).

Subdivision 3 requires that the bonds issued in a manner consistent with state law or this section.  Requires that the bond state that the full faith and credit of the state is not pledged.  Allows the bonds to be sold at either public or private sale, bear interest at a fixed or variable rate, and be fully negotiable.

Subdivision 4 authorizes the Commissioner to issue refunding bonds and provides for use of the proceeds of refunding bonds.

Subdivision 5 authorizes specified entities to legally invest funds in any appropriation bond.

Subdivision 6 provides that the appropriation bonds are not public debt of the state and the full faith, credit, and taxing powers of the state are not pledged to the payment of the appropriation bonds or to any payment the state agrees to make under this section.  Provides that the appropriation bonds are not obligations paid directly from a tax of statewide application.  Provides that the appropriation bonds be payable from an amount the Legislature appropriated for debt service; however, nothing in this section shall require the state to appropriate funds sufficient to make debt service payments on the appropriation bonds.  Provides a mechanism to cancel the bonds in the event the Legislature does not provide sufficient amounts for debt service.

Subdivision 7 requires that the proceeds of the appropriation bonds and interest be credited to the special appropriation stadium bond proceeds fund and be appropriated to the Commissioner of Management and Budget for payment of specified expenses.  Allows the proceeds to be provided to the authority for use on the stadium project under chapter 473J.

Subdivision 8, paragraph (a) requires that the Commissioner of Management and Budget, in consultation with the Commissioner of Revenue, determine the increase in revenues received from taxes imposed on charitable gambling over those estimated in the February forecast for that fiscal year by March 15 each year.  Sets the February 2012 revenue forecast as the baseline for fiscal year 2015, instead of using the current year revenue forecast for that year only.  Requires that the calculations be made net of estimated refunds of the taxes required to be paid.

Paragraph (b) sets the amount of revenue for paying the debt service on the appropriation bonds equal to the increase in revenues as calculated under paragraph (a) less specified appropriations and payments.

Paragraph (c) limits the applicability of this subdivision until after the issuance of the appropriation bonds.

Subdivision 9, paragraph (a) appropriates the amount needed to pay principal and interest on appropriation bonds issued under this section each year from the general fund to the Commissioner for deposit into the bond payments accounts.  Makes the appropriation subject to repeal, unallotment, or cancellation.

Paragraph (b) allows the Commissioner the authority to deposit additional revenues, after the provisions of subdivision 8, paragraph (b) have been satisfied, in any debt service reserve account established with respect to the appropriation bonds.  For any amounts not required for a debt service reserve account, allows the Commissioner the authority to deposit to any general fund reserve account established for application against any shortfall in the Minneapolis Convention Center tax revenue under Article 4.  For any amounts not required for a debt service reserve account and general fund reserve account, provides for early payoff of bonds issued under this section.  For any amounts not required for the preceding three payments, provides for early payoff of state general obligation bonds.

Subdivision 10 waives the state’s immunity from lawsuits involving the appropriation bonds or ancillary contracts entered into by the Commissioner of Management and Budget.

Section 2 [Suites surcharge] imposes a ten percent surcharge on the sale or rental of suites for NFL team games and events at the stadium.

Section 3 [Appropriation] appropriates $6,000,000 annually from the general fund to the Commissioner of Management and Budget for a grant to the Minnesota Sports Facilities Authority to pay operating costs.  This section appropriates $1,500,000 annually from the general fund to the Commissioner of Management and Budget for a grant to the Minnesota Sports Facilities Authority to pay capital costs.  These annual appropriations are subject to an annual adjustment between zero and five percent.  If state appropriation bonds have not been issued, amounts not to exceed the increased revenues from the expansion of lawful gambling are appropriated to the Commissioner of Management and Budget to make grants to the Minnesota Sports Facilities Authority for stadium costs, including land acquisition and construction.  Appropriates the revenue from the Minneapolis Convention Center taxes from the general fund to the Commissioner of Management and Budget for calendar years 2021 to 2056 for a grant to the Minnesota Sports Facilities Authority.  Appropriates $1.3 million annually to the city of St. Paul from 2014 to 2034 for operating or capital costs of existing or new sports facilities. 

ARTICLE 3.  CONFORMING CHANGES

Sections 1 to 5 strike obsolete references to the Metropolitan Sports Facilities Commission (MSFC), which is abolished in Article 1.

Section 6 provides that employees of the former MSFC are members of the Minnesota State Retirement System with respect to service rendered on or after May 17, 1977.

Section 7 repeals obsolete sections of Minnesota Statutes, chapter 473, pertaining to the MSFC.

Section 8 provides that this article is effective June 30, 2016.

ARTICLE 4.  MINNEAPOLIS CONVENTION CENTER

Section 1 [City of Minneapolis Sales Tax; Allocation of Revenues], subdivision 1 provides that this section governs the applications of the Minneapolis local sales taxes. 

Subdivision 2 [Definitions] defines “City” to mean the city of Minneapolis.  “Special law” means the 1986 law authorizing the Minneapolis local sales taxes, as amended.  “Tax” means the taxes imposed under the 1986 law.  The terms defined in Article 1, section 8 also apply to this section.

Subdivision 3 [General allocation of revenues] requires the Commissioner of Revenue to apply the tax revenues first to the costs of collecting and administering the taxes; then to costs for issuing refunds, if any, to taxpayers; then to the general fund beginning in 2021 (see Subdivision 4, below); with the remainder to the city for use authorized in the enacting law.

Subdivision 4 [General fund allocations] directs the Commissioner of Revenue to apply tax revenues as follows:

• Periodic amounts beginning in 2021 so that not later than 2056, the state bond debt service present value of $150,000,000 is restored to the general fund;
• Beginning in 2021, an amount equal to $1,500,000  per year, which has been adjusted annually since 2016, for a capital improvement reserve appropriation;
• Beginning in 2021, an amount equal to $6,000,000 per year, which has been adjusted annually since 2016 for an operating expense appropriation;
• Beginning in 2021, periodic amounts for recapture of the present value of the team’s advances of the city's share of capital improvements and operating expenses for 2016 through 2020; and
• Beginning in 2013, amounts of excess local sales tax revenue over and above the benchmark scheduled amounts, for the benefit of the stadium Authority.

The state’s annual adjustment factor is set at the annual increase in the Minneapolis sales taxes received, limited to between zero and five percent.

Section 2 [Sales and Use Tax], subdivision 1 amends Minnesota Laws pertaining to the Minneapolis Convention Center.  It provides that the Minneapolis sales tax, allowed up to one half of one percent, does not apply to liquor sales and excludes advertising and packing materials from items subject to the tax.  The tax is extended through 2056 and may be adjusted up to the allowable rate provided that its proceeds produce sufficient revenue to pay stadium costs outlined in section 1. 

Subdivision 2 allows the Commissioner of Revenue to charge the city a reasonable fee for collection of the city local sales taxes.

Subdivision 3 provides that revenues from the Minneapolis local tax may be used to fund capital or other economic development projects authorized in subdivision 4. 

Subdivision 4 authorizes revenues from the Minneapolis local sales tax to be used to fund capital projects or for other economic development, but the city may first direct such revenue to convention center debt, operations, capital improvements, and marketing.

Section 3 [Liquor, lodging and restaurant taxes] amends the Minneapolis liquor, lodging, and restaurant tax laws.  It clarifies that the maximum three percent sales tax on liquor sales is imposed when liquor is sold at licensed on-sale liquor establishments located in the downtown taxing area, and that the maximum three percent lodging sales tax is imposed on sales of lodging for less than 30 days at a hotel, motel, rooming house, tourist court, or trailer camp located within the city.  The taxes authorized under this section are imposed until December 31, 2056, and may be adjusted so that the rates imposed, together with the general local sales tax in section 2, are sufficient to finance the purposes of section 1, subdivisions 3 and 4.  These taxes are subject to the same interest penalties and enforcement provisions as other state general sales tax laws.

Section 4 [Charter limitations] provides that any amounts expended or indebtedness or obligations incurred resulting from proceeds of the Minneapolis liquor, lodging and restaurant taxes are not city expenditures under this article within the meaning any city charter provision.

Section 5 [Effective date] states that this article is effective the day after the Minneapolis City Council approves its provisions and its chief clerical officer certifies such approval to the secretary of state.

Section 6 [Severability] provides that if any section of this article is found to be invalid, it is severable from other provisions in the article, which will remain in effect.

Section 7 [Local sales tax requirements] states that the changes in this article to the Minneapolis local sales tax and the Minneapolis local liquor, lodging and restaurant taxes are not subject to provisions of sales tax law requiring a local governing body resolution and referendum before the Legislative approval.

ARTICLE 5.  LAWFUL GAMBLING

Section 1 [Bar operation] changes the definition of “bar operation” to remove a limitation to premises where sales of gambling equipment be made from a common area where food and beverages are also sold.

Section 2 [Bar bingo] excludes bingo games linked to other permitted premises from the definition of “bar bingo.”

Section 3 [Bingo occasion] modifies the definition of “bingo occasion”.  Linked bingo games played on electronic bingo devices may be played during regular business hours and all play during this period is a bingo occasion for reporting purposes.  For premises where bingo is the primary business, regular business hours are between 8:00 a.m. and 2:00 a.m.

Section 4 [Booth operation] modifies the definition of “booth operation” to remove a limitation to premises where disposable gambling equipment is sold and redeemed from a separate enclosure distinct from areas where food and beverages are sold.

Section 5 [Electronic bingo device] modifies the definition of “electronic bingo device.” An electronic bingo device is a hand held and portable electronic device that:

1. is used by a bingo player for specified uses;
2. limits the play of bingo faces per game;
3. requires coded entry to activate play but does not allow the use of coins, currency, or tokens to be inserted to activate play;
4. may only be used for play against other bingo players;
5. has no addition as a gambling device;
6. has the capability to ensure adequate levels of security and internal controls;
7. has the capability to permit the board to electronically monitor operation of the device; and
8. has the capability to allow use by a player who is visually impaired.

Section 6 [Electronic pull-tab device] adds a definition for “electronic pull-tab device.”  An electronic pull-tab device means  a device that:

1. is used to play one or more electronic pull-tab games;
2. requires a coded entry to activate play but does not allow use of coin, currency, or tokens to be inserted to activate play;
3. requires the player to open each pull-tab ticket and have the option to open all tabs at the same time or each individual line, row, or column of each ticket;
4. maintains information pertaining to accumulated win credits that may be applied to games in play or redeemed upon termination of play;
5. has no spinning symbols or other representations that mimic a video slot machine;
6. has no additional function as a gambling device;
7. may incorporate an amusement game feature as part of the pull-tab game but may not require additional consideration for that feature or contain or award any prize or other benefit for that feature;
8. may have auditory or visual enhancements to promote or provide information about the game being played, provided the component does not affect the outcome of a game or display the results of a game;
9. maintains, or nonresettable meters, a printable, permanent record of all transactions involving each device and electronic pull-tab games played on the device;
10. is not a pull-tab dispensing device as defined elsewhere in statute; and
11. has the capability to allow use by a player who is visually impaired.

Section 7 [Electronic pull-tab game] defines an “electronic pull-tab game” to mean a pull-tab game containing:

(a) facsimiles of pull-tab tickets that are played on an electronic pull-tab device;

(b) a predetermined finite number of winning and losing tickets, not to exceed 7,500 tickets;

(c) the same price for each ticket in the game;

(d) a price paid by the player of not less than 25 cents per ticket;

(e) tickets that are in conformance with applicable board rules for pull-tabs;

(f) winning tickets that comply with certain prize limits;

(g) a unique serial number that may not be regenerated;

(h) an electronic flare that displays the game name, form number, predetermined, finite number of tickets in the game, and prize tier; and

(i) no spinning symbols or other representations that mimic a video slot machine.

Section 8 [Electronic pull-tab game system] defines “electronic pull-tab game system” as the equipment to conduct, manage, and record electronic pull-tab games, and to report and transmit the game results to the Department of Revenue.  The system must provide specified levels of security and access.  The system must contain a point of sale station.

Section 9 [Gambling equipment] modifies the definition of “gambling equipment” to divide it into categories of “disposable” or “permanent”, listing equipment that is included in each category.  The revised definition includes all items that were previously deemed “gambling equipment” and adds “electronic pull-tabs" and “electronic pull-tab devices” (under “permanent gambling equipment”).

Section 10 [Lawful Purpose] strikes a cross-reference to the statute governing pull-tab taxes.

Section 11 [Linked bingo game provider] modifies the definition of “linked bingo game provider” to include any person who provides the means to link bingo games. 

Section 12 [Linked bingo game system] modifies the definition of “linked bingo game system”.  For linked electronic bingo games, the system includes electronic bingo devices.

Section 13 [Linked bingo prize pool] modifies the definition of “linked bingo prize pool” to carry a prize pool from one game to another in a progressive linked bingo game.

Section 14 [Paddle wheel] modifies the definition of “paddle wheel” to include an electronic device that simulates a paddle wheel to determine a winning number matching a paddle ticket.  Requires that the wheel be vertical and may only be used to determine winning numbers matching a winning paddle ticket.

Section 15 [Promotional ticket] limits the definition of promotional tickets to pull-tab and tipboard tickets that are paper.

Section 16 [Pull-tab] expands the definition of “pull-tab” to include a facsimile of a paper pull-tab ticket used in conjunction with an electronic pull-tab device.

Section 17 [Lawful Gambling] excludes electronic bingo devices and electronic pull-tab devices from the definition of gambling device for purposes of certain chapters of the criminal and tax codes.  This section specifies that an electronic game device allowed for lawful gambling may not be a slot machine.  Electronic game devices may only be used in the conduct of lawful gambling and may not display or simulate any other form of gambling or entertainment, except as otherwise provided in law.

Section 18 [Pull-tab sales from dispensing devices] deletes certain requirements governing rules that regulate the use of pull-tab dispensing devices.

Section 19 [Electronic bingo devices] deletes certain requirements governing rules that regulate the use of electronic bingo devices. This section gives the Gambling Control Board authority to require deactivation of an electronic bingo device for violation of a law or rule and to implement any other controls to ensure and maintain the integrity of electronic bingo devices and the electronic bingo games played on the devices.

Section 20 [Electronic pull-tab devices and electronic pull-tab game system] authorizes the Gambling Control Board to adopt rules to ensure the integrity of electronic pull-tab devices, the electronic pull-tab games played on the devices, and the electronic pull-tab game system necessary to operate them.  The Board may not require an organization to use electronic pull-tab devices.  This section requires the Board to examine electronic pull-tab devices before authorizing their lease or sale.  The Board is authorized to contract for examination of game systems and electronic pull-tab devices and is permitted to require a working model  for testing, examination and analysis.  A system must be approved by the Board before its use and must have the capability to permit the Board to electronically monitor its operation and internal accounting systems.  The Board is permitted to require a manufacturer to submit a certificate, with certain statements, from an independent testing lab that is approved by the Board to perform testing services. The Board may require deactivation of an electronic pull-tab device for violation of law or rule and to implement integrity controls.

Section 21 [Mandatory disqualification] no longer prohibits the Board from issuing licenses to an organization that has had its license permanently revoked.  The Board is also no longer required to revoke a license in this situation.

Section 22 [License revocation, suspension, denial; censure] provides that the revocation or suspension of an organization's license may not exceed ten years unless one of the statutory conditions is met.

Section 23 [Prohibited acts; licenses required] allows a linked bingo game provider to provide electronic bingo devices for linked electronic bingo games without having obtained a distributor license.  This section precludes a distributor or distributor salesperson from also being licensed as a linked bingo game provider.

Section 24 [Prohibition] expands certain prohibitions in current law on actions of distributors, distributor salespersons, or representatives of a distributor to apply when gambling equipment is leased.  This section modifies certain other prohibitions to apply to paper pull-tab games or deals.

Section 25 [Sales from facilities] expands certain requirements for gambling equipment to leased equipment.  This section requires a distributor and a manufacturer to notify the Gambling Control Board of the method it will use to sell and transfer electronic pull-tab games to licensed organization or distributors, and must receive approval of the Board before implementing or making changes to the approved method. 

Section 26 [License required] permits a manufacturer of gambling equipment to also be licensed as a linked bingo game provider.

Section 27 [Paper pull-tab and tipboard flares] amends current requirements for pull-tabs and tipboards to apply to paper pull-tabs and tipboards.

Section 28 [Samples of gambling equipment] requires a manufacturer of gambling equipment  to submit to the Board the applicable version of software necessary to operate electronic devices and related systems for testing of software and software upgrades.

Section 29 [License application] allows the Board to issue a license to a manufacturer of gambling equipment.

Section 30 [Attachments to application] limits the fees a linked bingo game provider may charge for the cost of providing services and equipment to organizations licensed to conduct linked bingo.

Section 31 [Linked bingo game services requirement] sets certain requirements for linked bingo game providers and distributors.

Section 32 [Contents of application] provides that a lease for a premises must contain a termination clause.  The reference to a thirty-day period is removed.

Section 33 [Conduct of bingo] requires that the price of a face played on an electronic bingo device not be less than the price of a face on a bingo paper sheet sold for the same game at the same occasion.

Section 34 [Bar bingo] strikes the prohibition against paying rent for a bar bingo occasion.

Section 35 [Linked bingo games] strikes the limit on the number of linked bingo games a licensed organization may conduct.  This section adds a requirement that linked bingo games may only be conducted by licensed organizations who have an agreement with the linked bingo game provider.

Section 36 [Linked bingo games played exclusively on electronic bingo devices], subdivision 9, sets requirements and limits for the play of electronic bingo devices.  The premises must be:  (1) licensed for on-sale or off-sale of intoxicating liquor of 3.2 percent malt beverages, but not including a general food store or drug store permitted to sell alcoholic beverages; or (2) a premises where bingo is conducted as the primary business and has a seating capacity of at least 100.  Until July 1, 2013, the number of electronic bingo devices is limited to six for premises with a seating capacity of 200; to 12 for a premises with a seating capacity greater than 200; and to 50 for a premises where bingo is the primary business. After July 1, 2013, the Gambling Control Board may increase the limits on the number of electronic bingo devices.  Prior to a bingo occasion, a linked bingo game provider must provide to the Board a bingo program.  Before participating in the play of a linked bingo game, a player must present and register a valid picture identification card that includes the player’s address and date of birth.  An organization may remove from play a device that a player has not used in a specified period of time.  The organization must provide notice in its house rules.

Section 37 [Conduct of pull-tabs], subdivisions 1 and 2 apply Gambling Control Board rules for paper pull-tabs to electronic pull-tab games.

Subdivision 3 sets location restrictions and requirements for pull-tab dispensing devices.  Pull-tab dispensing machines may only be used at a permitted premises that is:  (1) a licensed premises for on-sale of intoxicating liquor or 3.2 percent malt beverages; (2) a premises where bingo is conducted as the primary business; or (3) an establishment licensed for the off-sale of intoxicating liquor, other than drug stores and general food stores.  The number of pull-tab dispensing devices located at any permitted premises is limited to three.

Subdivision 4 sets requirements and restrictions on electronic pull-tab devices.  Electronic pull-tab devices may only be used at a permitted premises: (1) that is licensed for the on-sale or off-sale of intoxicating liquor or 3.2 percent malt beverages, not including general food stores or drug store; or (2) that is a premises where bingo is conducted as the primary business and has a seating capacity of at least 100; and (3) where the licensed organization sells the paper pull-tabs.  Until July 1, 2013, the number of electronic pull-tab devices in play is limited to six for a premises with a seating capacity of 200 or less; to 12 for a premises with more than 200 seats; and to 50 for a premises where the primary businesses is bingo.  After July 1, 2013, the Gambling Control Board may increase the limits on the number of electronic bingo devices.  The hours of operation are limited to 8:00 a.m. to 2:00 a.m.  All electronic pull-tab games must be sold and played on permitted premises and may not be linked to other permitted premises.  Electronic  pull-tab games may not be transferred to any other location by the licensed organization.  Electronic pull-tab games may be commingled if the games are from the same family of games and manufacturer and contain certain similarities.  The organization may remove a device from play if a player does not use it for a specified time.  The organization must provide notice in its house rules.  Before playing an electronic pull-tab game, a player must present and register a valid picture identification card that includes the player’s address and date of birth.  A player may only use one device at a time.

Subdivision 5 allows the Board to permit pull-tab games in which the holders of predesignated winning tickets have the option of turning in the winning tickets per the chance to win a more valuable prize.

Section 38 [Lease or ownership required; rent limitations] modifies and sets limits that an organization may pay for rent. 

Section 39 [Accounts] requires that gambling receipts from electronic pull-tab games and all linked electronic bingo games must be recorded daily and deposited into a gambling bank account within two business days.

Section 40 [Expenditures] modifies certain reporting requirements to an electronic format.  This section is effective July 1, 2012.

Section 41 [Reports] modifies certain reporting requirements.   This section eliminates a requirement that an organization report annually to its membership and eliminates requirements for reporting of allowable expenses, lawful purpose expenditures, the percentage of annual gross profits used for charitable contributions; and the percentage of annual gross profits used for all taxes and fees.  This section is effective July 1, 2012.

Section 42 [Pull-tab records] specifies that certain rules are applicable to paper pull-tabs.

Section 43 [Linked bingo prizes] sets a prize limit for linked bingo games played exclusively with electronic bingo devices.  An organization may not contribute more than 85 percent of the gross receipts per permitted premises to a linked bingo game prize pool.  This section modifies the condition under which a portion of gross receipts is carried over in a progressive linked bingo game.  This section deletes a calculation that reduces the annual limit for progressive bingo game prizes by the amount an organization contributes to progressive linked bingo games during the same year.  This section requires that prizes in excess of $599 be paid within three business days for linked bingo games played exclusively with electronic bingo devices.  Winners of prizes in excess of $599 for linked bingo will be given a receipt or claim voucher as proof of a win.

Section 44 [Appropriation] appropriates $779,000 in fiscal year 2013, $779,000 in fiscal year 2014, and $779,000 in fiscal year 2015 from the lawful gambling regulation account in the special revenue fund, to the Commissioner of Human Services for operating expenses related to the regulatory oversight of lawful gambling for electronic pull-tabs and electronic linked bingo.  One-half of one percent of the revenue deposited in the general fund for general obligation grant is appropriated to the Commissioner of Human Services for the compulsive gambling treatment program, and one-half of one percent of the revenue deposited in the general fund for general obligation grants is appropriated to the Gambling Control Board for a grant to the state affiliate of the National Council on Problem Gambling to increase public awareness of problem gambling, education and training for those providing treatment services, and research relating to problem gambling.

Section 45 [Effective date] makes this article effective the day following final enactment, unless otherwise provided.

ARTICLE 6.  RACINO

Section 1 [Prohibition near racino] prohibits ATM's on the premises of a racino.

Section 2 [Commission powers and duties] adds duties for the Racing Commission, including ensuring security and licensing employees and vendors involved in the conduct of gaming machines at a racetrack.  This section requires the commission to be reimbursed by the racetrack for its costs for the added duties. This section requires the commission to review procedures of the racetrack to ensure proper disbursements from a new equine industry improvement fund established in Section 3.

Section 3 [Equine Industry Improvement Fund] requires the Racing Commission to establish an equine industry improvement fund and requires that funds the commission receives from gaming be deposited in the fund.  Money in the fund is applied as follows: to purse supplements (75 percent), a breeder’s fund (20 percent), and an equine industry enhancement fund (five percent). This section specifies further details about distribution of the funds.

Section 4 [Lottery contract holder; minimum racing days] sets a minimum number of days of live racing required for racetrack licensees that hold location contracts for gaming.  Licensees authorized to conduct live racing for more than one breed (currently, Canterbury Park) are required to conduct thoroughbred and quarter horse racing.  This section requires the licensee to offer the equivalent of at least two quarter horse races for each racing day, but allows the licensee and the organization representing the majority of certain quarter horse owners to agree to a different number of live races to be offered.  A licensee that willfully fails to offer the required races is subject to disciplinary action. 

Section 5 [Lottery gaming machines; in-lieu fee] exempts adjusted gross revenue from gaming machines from sales tax, and establishes an in-lieu fee to be transmitted by the Racing Commission to the Commissioner of Revenue who deposits the money in the state treasury. The in-lieu fee is calculated as follows:

• 25 percent for the first $150 million of adjusted gross revenue;
• 30 percent of adjusted gross revenue between $150 million and $200 million; and
• 40 percent of adjusted gross revenue over $200 million.

Section 6 [Exclusions] permits the State Lottery and location contract holders to possess a gambling device.  “Gambling device,” as amended later in the bill, includes gaming machines.

Section 7 [Restrictions] makes it legal for a manufacturer to sell, lease, or rent a gambling device to the State Lottery.

Section 8 [Adjusted gross gaming machine revenue] defines “adjusted gross gaming machine revenue” as all money received by the lottery for gaming machine plays, other than promotional plays, less prizes paid for gaming machine games.

Section 9 [Gaming machine] defines “gaming machine” to mean “any electronic device which, upon insertion of money, coin, token, voucher, electronic card, or other consideration, allows the play of a game, authorized by the director of the lottery, the outcome of which is determined entirely or partly by chance."  A gaming machine may award a player a prize in the form of money, tokens, prize slips, or other authorized consideration. 

Section 10 [Gaming machine area] defines “gaming machine area” as an area within ten feet of a gaming machine.

Section 11 [Gaming machine game] defines “gaming machine game” to mean a game operated by a gaming machine as authorized by the lottery director.

Section 12 [Gaming machine play] defines “gaming machine play” as an electronic record that proves participation in a gaming machine game.

Section 13 [Lottery procurement contract] extends the definition of “lottery procurement contract” to include contracts to provide and maintain gaming machines, and to provide computer hardware and software for monitoring gaming machine plays.

Section 14 [Lottery operations] exempts location contract payments to racetracks from limits on operations expenses.

Section 15 [Restrictions] is a conforming amendment to allow the lottery director to install or operate gaming machines that may be operated by coin or currency.

Section 16 [Gaming machines], subdivision 1, paragraph (a), allows the lottery director to enter into contracts to provide locations for gaming machines.  This section exempts location contracts from state procurement requirements. The lottery director may enter into a location contract only with a holder of a class A racing licenses.  (Under current law, class A licenses are held by owners and operators of a racetrack on which paramutuel betting is conducted.  Class A licenses are held by the owners and operators of Canterbury Park and Running Aces Harness Park.) This section voids a location contract if the racetrack does not meet one of the following conditions:

• has hosted at least 75 days of live racing during the previous year; or
• has not been approved, unless approval is pending, for at least 75 days of live racing during the present year;

For a racetrack that is authorized to conduct racing for only one breed of horse, the live racing requirement is 50 days.

Paragraph (b) sets conditions under which the lottery director may cancel, suspend, or refuse to renew a location contract.  This section makes a cancellation, suspension, or refusal to renew a location contract a contested case under the Adminstrative Procedure Act.

Paragraph (c) sets tiered compensation to the racetrack, as follows:

• of the first $150 million of annual adjusted gross gaming machine revenue, 60 percent to the licensee;
• of annual adjusted gross gaming machine revenue between $150 million and $200 million, 55 percent to the licensee; and
• of annual adjusted gross gaming machine revenue in excess of $200 million, 45 percent to the licensee.

Paragraph (d) requires a licensee to pay one percent of the compensation it receives to the city and one percent to the county in which the licensee conducts racing.

Subdivision 2, paragraph (a), requires that gaming machines at racetracks be operated and controlled by the lottery director.

Paragraph (b) delineates responsibilities of the lottery director and the holder of the location contracts.

Paragraph (c) requires that gaming machines be maintained by the lottery or its vendor.

Paragraph (d) requires a central communication system, located at the lottery office, that monitors activities on gaming machines.

Paragraph (e) requires the lottery director to supervise the security arrangements for gaming machines.

Paragraph (f) requires that advertising and promotional material produced by the racetrack relating to the gaming machines be approved by the director.

Paragraph (g) allows the lottery director to implement controls for gaming machines.

Paragraph (h) requires the location contract holder (i.e., the racetrack) to prevent drinking and prohibits serving alcohol in the gaming machine areas, unless a tribal casino within ten miles allows alcohol.

Subdivision 3 requires that gaming machines be capable of being linked electronically to a central communications system to provide certain auditing program information.

Subdivision 4 directs the lottery director to specify games that may be placed on a gaming machine.  Gaming machines may conduct parimutuel wagering and display horse races.

Subdivision 5 requires that the lottery director examine prototypes of gaming machines and requires that the cost of examination be paid by the manufacturer of the machines.  This section permits the director to contract for the examination of gaming machines.

Subdivision 6 permits the lottery director to require working models of gaming machines to be transported to certain locations for testing, examination, and analysis, at the manufacturer's expense.

Subdivision 7 requires players to be bound by applicable rules and game procedures.  The player acknowledges that a determination of winning a prize is subject to certain rules and game procedures, and validation tests.  This section precludes a person under 18 years of age from claiming a prize from operation of a gaming machine.  This section exempts a gaming machine prize from the requirement of withholding of delinquent state taxes or other debts.  This withholding requirement is in current law and applies to lottery prizes. 

Subdivision 8 sets an 18-year age limit for playing a game on a gaming machine.  Precludes the lottery director, lottery employees, and certain family members from playing a game on a gaming machine or receiving a prize.

Subdivision 9 requires the lottery director to post the telephone number of the state-sponsored compulsive gambling program, and establishes a responsible gambling plan with annual reporting to the Legislature.

Subdivision 10 precludes political subdivisions from requiring a license to operate a gaming machine; restricting or regulating the placement of gaming machines; or imposing a tax on the business of operating gaming machines.

Section 17 [Lottery budget] requires the lottery director to submit a budget for the operation and control of gaming machines to the Commissioner of Management and Budget.  This section allows the lottery director to expend amounts necessary to operate and control gaming machines without being subject to budget plan processes and limits on operating expenses in current law for the operation of the lottery.  This section exempts the amounts spent by the lottery director to operate and control gaming machines in fiscal years 2013 and 2014 from the limit for operation of the lottery. 

Section 18 [Racino revenue] requires the Commissioner of Revenue to deposit the amount it receives from gaming machine revenue  in the general fund.

Section 19 [Severability; savings] declares that if any provision of this act is invalid, all other provisions remain valid.

Section 20 [Repealer] repeals limits on the number of tables allowed at a card club and at tournaments and on limits on wagers at card clubs.

Section 21 [Effective Date] this act is effective the day following final enactment.

ARTICLE 7.  MISCELLANEOUS

Section 1 [Use of local tax revenues by cities of the first class] adds a provision allowing cities of the first class to use excess local sales tax revenues after projects authorized under a special law have been completed to fund capital projects with a total construction cost of at least $40 million.

Section 2 [Use of the Stadium] requires the Minnesota Vikings to make the stadium available for amateur sports activities for up to ten days per year during the time stadium bonds are outstanding.  The commission must negotiate in good faith for the time it uses the stadium. The team must make the stadium available, at no charge, for up to seven days per year for Minnesota State High School League activities for high school soccer and football tournaments.

ARTICLE 8.  GAMBLING TAX CHANGES

Section 1 [Gambling product] amends the definition of “gambling product” to include electronic linked bingo games and electronic pull-tab games. This section is effective July 1, 2012.

Section 2 [Gross receipts] amends the definition of “gross receipts” to include linked bingo paper sheets, electronic linked bingo games, and electronic pull-tab games.

Section 3 [Ideal gross] amends the definition of “ideal gross” to include electronic pull-tab games, paddlewheel games, and raffle tickets. Clarifies a free play ticket applies to pull-tabs and electronic pull-tabs.  Ideal gross is also defined to mean the total amount of receipts that would be received if every bingo paper sheet, linked bingo paper sheet, and electronic linked bingo games were sold at face value. This section is effective July 1, 2012.

Section 4 [Imposition] adds electronic linked bingo to the list of tax exempt lawful gambling activities.  This section clarifies that both paper and electronic pull-tabs and electronic linked bingo are exempt from the tax.  This section is effective for games reported as played after June 30, 2012.

Section 5 [Collection; disposition]  eliminates references to the distributor tax, which is repealed in section 13.  Requires distributors to file monthly sales figures with the Commissioner of Revenue on a form prescribed by the Commissioner.  Provides that the taxes on the sale of pull-tabs or tipboards by a distributor are imposed on the retail sale price and that the retail sale of pull-tabs or tipboards by a charitable organization is exempt from sales taxes, local taxes, and license fees, except the local investigation fee.  Effective July 1, 2012.

Section 6 [Combined net receipts tax] specifies tax rates and combined net receipts thresholds for purposes of the tax on organizations' net receipts from forms of gambling other than paper bingo, raffles, and paddle tickets.  Effective July 1, 2012.

Section 7 [Unaccounted games] requires a licensed distributor that cannot account for a paper or electronic pull-tab game, tipboard deal, paddletickets, an electronic bingo game, bingo paper sheets, or linked bingo paper sheets to report the games or sheets to the commissioner as lost and remit a tax of six percent on the ideal  gross of the sheets or games. This section is effective July 1, 2012.

Section 8 [Untaxed gambling product] adds references to electronic pull-tab games, linked bingo, and electronic linked bingo. This section is effective July 1, 2012.

Section 9 [Refunds; appropriation]  strikes an unnecessary cross reference for purposes of the appropriation from the general fund to the Commissioner of Revenue to issue refunds for overpaid taxes.

Section 10 [Defective gambling products] eliminates references to a refund of the upfront distributor tax for unplayed or defective gambling products and adds language allowing the commissioner to require that add defective or unplayed pull-tabs, tipboards, paddle tickets, paper bingo sheets, and linked bingo paper sheets to be set aside for inspection by a Revenue Department employee.

Section 11 [Untaxed gambling equipment] removes a cross-reference to correspond with other changes in the bill.

Section 12 [Repealer] repeals the pull-tab and tipboard tax.  It also repeals the definition of "active member" in the lawful gambling chapter.  This section is effective for games sold after June 30, 2012.