SB 116

This bill shall be known and may be cited as the Alabama Lottery Act. This bill would provide legislative intent; provide powers and duties of the Alabama Lottery Commission; provide for use of lottery proceeds; levy and allocate a state gross receipts tax on gaming revenue; levy and allocate a local gross receipts tax on gaming revenue; levy and allocate a tax on vendors of video lottery equipment; provide for the disposition of state gaming tax proceeds; and provide limitations on retailers

Relating to lotteries; to provide legislative intent; provide powers and duties of the Alabama Lottery Commission; provide for use of lottery proceeds; levy and allocate a state gross receipts tax on gaming revenue; levy and allocate a local gross receipts tax on gaming revenue; levy and allocate a tax on vendors of video lottery equipment; and provide limitations on retailers.

Section 1

This act shall be known and may be cited as the Alabama Lottery Act.

Section 2

Declarations. The Legislature hereby recognizes that the operations of a lottery are unique activities for state government and that a corporate structure will best enable a lottery to be managed in an entrepreneurial and business-like manner. It is the intent of the Legislature that the Alabama Lottery Corporation shall be accountable to the Governor, the Legislature, and the people of the State through a system of audits, reports, and thorough financial disclosures as required by this act.

Section 3

For the purposes of this amendment, the following terms shall have the following meanings: (1) COMMISSION. The Alabama Lottery Commission. (2) CORPORATION. The Alabama Lottery Corporation. (3) EXECUTIVE DIRECTOR. The Executive Director of the Alabama Lottery Corporation who shall also serve as the chief executive officer of the corporation. (4) GAMING GROSS REVENUE. The total amount of money or value in any form received by a licensed facility with respect to the playing of any form of video lottery, less the total money or value in any form paid as prizes or winnings to the players of the video lottery and free play or promotional credits, but before deduction of any expenses incurred to operate the establishment, including, but not limited to, depreciation or leasing costs of physical facilities and equipment, wages, and other employment costs, utilities, interest, and taxes. Gaming gross revenue may not be included in a pari-mutuel pool for the purpose of determining any tax levied on pari-mutuel wagering or for any other purpose. (5) LICENSED FACILITIES. The existing entities currently licensed to conduct pari-mutuel wagering at the four existing racetracks located in Jefferson, Mobile, Macon, and Greene counties, and one location in Lowndes county to be selected by the Lottery Commission. There will be no more than one licensed facility in a county, and the Lottery Commission will award the license. (6) RACETRACK. A corporation, limited liability company, or other business entity authorized by a local racing commission pursuant to law to operate and conduct pari-mutuel wagering on live or simulcast races upon the ratification of the amendment adding this part, in Mobile County, Macon County, the city of Birmingham in Jefferson County, or Greene County. (7) RETAILER. Any person with whom the corporation has contracted to sell lottery tickets to the public. (8) VENDOR. Any person who has entered into a major lottery specific procurement contract with the corporation or licensed facility. (9) VIDEO LOTTERY TERMINAL. An video and/or electronic device located in a licensed facility in which currency or credits are deposited and a selection is made by a player in order to play any lottery game. A terminal shall be considered a video lottery terminal notwithstanding the use of an electronic credit system making the deposit of bills or coins necessary. (10) VIDEO LOTTERY TERMINAL VENDOR. Any person who manufactures, distributes, supplies, vends or leases an video lottery terminal or equipment necessary to conduct an video lottery by a licensed facility.

Section 4

Alabama Lottery Commission; duties; powers. (a) The Alabama Lottery commission shall authorize the corporation to issue a proposal to secure goods and services. (b) The commission shall elect a chairman from among its appointed members. (c) All members of the commission shall be reimbursed for necessary travel and other reasonable expenses incurred in the performance of their official duties. (d) The commission shall appoint and shall provide for the compensation of an executive director who shall direct the day-to-day operations and management of the corporation. The executive director shall serve at the pleasure of the commission. (e) The executive director may not be a member of the commission. (f) The commission shall provide the executive director with private-sector perspectives on the operation of a large marketing enterprise. The commission shall do all of the following: (1) Approve, disapprove, amend, or modify the budget recommended by the executive director for the operation of the corporation. (2) Approve, disapprove, amend, or modify the terms of major lottery procurements recommended by the executive director. (3) Serve as a board of appeal for any denial, revocation, or cancellation by the executive director of a contract with a lottery retailer. (g) The commission may adopt, without recourse to the administrative rule process unless it so desires, rules for the conduct of specific lottery games, including but not limited to, rules specifying any of the following: (1) The types of games to be conducted, including, but not limited to, a state lottery or a multi-state lottery, instant tickets, scratch-off ticket games, Keno, iLottery, or any other lottery offered in another state. (2) The price of tickets. (3) The number and amount of prizes. (4) The method and location of selecting or validating winning tickets. (5) The frequency and the means of conducting drawings which shall be open to the public. (6) The manner of payment of prizes. (7) The frequency of games and drawings. (8) The manner and amount of compensation to lottery retailers, which shall be uniform. (9) Any other matters necessary or desirable for the efficient and effective operation of the lottery and for the convenience of the public. (h) The corporation may enter into written agreements with one or more states for the operation, marketing, and promotion of a joint lottery or joint lottery games. (i) The corporation shall adopt by administrative rule a system of continuous internal audits and maintain weekly or more frequent records of lottery transactions, including distribution of tickets to lottery retailers, revenues received, claims for prizes, prizes paid, and all other financial transactions of the corporation. (j) No officer or employee of the corporation may have a financial interest in any vendor doing business or proposing to do business with the corporation or with a licensed facility. (k) No officer, director, or employee of the corporation may organize, participate in, or contribute to a political action committee. (l) The executive director shall direct and supervise all administrative and technical activities in accordance with this act and with administrative rules adopted by the commission.

Section 5

Disposition of Lottery Proceeds. On or before the last business day of the succeeding month, the corporation shall transfer the lottery proceeds held in the Lottery Trust Fund as follows: (1) 50 percent to the State General Fund; and (2) 50 percent to the Education Trust Fund.

Section 6

State Gross Receipts Tax; Local Gross Receipts Tax; Video Lottery Terminal Vendor Tax. (a) The state gross receipts tax on gaming gross revenue for each calendar month shall be paid by each licensed facility to the Department of Revenue on or before the 20th day of the next succeeding calendar month. (b) Except as otherwise provided in subsection (c), the local gross receipts tax on gaming gross revenue for each calendar month shall be paid to the county in which the facility is licensed on or before the 20th day of the next succeeding calendar month. The county shall retain one-half of the amount and shall apportion the remaining half among the municipalities in the county on the basis of the ratio of the population of the municipality to the population of all the municipalities in the county and immediately pay the amounts apportioned to the municipalities. (c) The local gross receipts tax on gaming gross revenue of a licensed facility operating in a Class 1 or Class municipality for each calendar month shall be paid to the Class 1 or Class 2 municipality on or before the 20th day of the next succeeding calendar month. The municipality shall retain one-half of the revenue, shall pay one-quarter of the revenue to the county in which the municipality is principally located, and shall apportion the remaining one-quarter of the revenue to the municipalities in the county other than the Class 1 or Class 2 municipality on the basis of the ratio of the population of the municipality to the population of all municipalities in the county other than the Class 1 or Class municipality. (d) An video lottery terminal vendor shall pay the state video lottery terminal vendor tax for each calendar month to the Department of Revenue on or before the 20th day of the next succeeding calendar month. (e) The state gross receipts tax on gaming gross revenue, the local gross receipts tax on gaming gross revenue, and the state video lottery terminal vendor tax shall be in lieu of all other state taxes or license fees levied with respect to the operation of video lotteries by a licensed facility. Notwithstanding the foregoing, a licensed facility is liable for all income taxes, franchise taxes, property taxes, lodging taxes, and sales and use taxes on merchandise, food, and beverage generally applicable at uniform rates to all businesses operating in the county in which the facility is licensed. (f) The proceeds derived from the state gross receipts tax on gaming gross revenue and the video lottery terminal vendor tax shall be deposited as follows: (1) 50 percent to the State General Fund; and (2) 50 percent to the Education Trust Fund.

Section 7

Statewide Network of Retailers. (a) The Legislature hereby recognizes that to conduct a successful lottery, the corporation must develop and maintain a statewide network of lottery retailers that will serve the public convenience and promote the sale of tickets, while insuring the integrity of the lottery. (b) An applicant may not be engaged exclusively in the sale of lottery tickets. However, this paragraph does not preclude the corporation from contracting for the sale of lottery tickets with nonprofit, charitable organizations or units of local government in accordance with this act. (c) Each lottery retailer shall be issued a lottery retailer certificate that shall be conspicuously displayed at the place where the lottery retailer is authorized to sell lottery tickets. (d) Except as otherwise provided in subsection (e) and except for lottery vending machines located in factories or package liquor stores, bars, or taverns to which persons under the age of 18 years are not permitted access or operated by blind persons as a part of a program established by a federal or state law, a lottery retailer shall locate all vending machines from which lottery tickets are dispensed in the sight of the employees of the lottery retailer. (e) Lottery kiosks or vending machines that are equipped with ID readers that determine the player is of legal age may be located out of sight of an employee of the lottery retailer.

Section 8

Proceeds from Ticket Sales; Rule Governing Retailers' Deposit of Lottery Proceeds. (a) All proceeds from the sale of lottery tickets, net of allowable sales commissions and credit for lottery prizes paid to winners by lottery retailers, shall constitute a trust fund until paid to the corporation either directly, or through the corporation's authorized collection representative. Proceeds shall include unsold instant tickets received by a lottery retailer and cash proceeds of sale of any lottery products. Sales proceeds and unused instant tickets shall be delivered to the corporation or its authorized collection representative upon demand. The corporation shall, by administrative regulation, require retailers to place all lottery proceeds due the corporation in accounts in institutions insured by the Federal Deposit Insurance Corporation or Federal Savings and Loan Insurance Corporation not later than the close of the next banking day after the date of their collection by the retailer until the date they are paid over to the corporation. The corporation may require a retailer to establish a single separate electronic funds transfer account, where available, for the purpose of receiving moneys from ticket sales, making payments to the corporation, and receiving payments from the corporation. Lottery retailers shall be personally liable for all proceeds. This section shall apply to all lottery tickets generated by computer terminal, other electronic device, and any other tickets delivered to lottery retailers. (b) Whenever any retailer who receives proceeds from the sale of lottery tickets in the capacity of a lottery retailer becomes insolvent, or dies insolvent, the proceeds due the corporation from such person or his estate shall have preference over all debts or demands. (c) Except as otherwise provided in subsections (d) and (e), a lien is hereby given to the corporation on all funds and other personal property, on all real property, and on all rights to real or personal property owned or subsequently acquired by each retailer in the amount of, and to secure, the retailer's obligations to remit lottery proceeds to the corporation. The lien shall be in the amount of all sums due to the corporation at any time, together with all interest, penalties, fees, commissions, charges, and other expenses incurred by reason of nonpayment of the lottery proceeds to the corporation or in the process of collecting those proceeds, and shall have priority over any other obligation or liability for which the funds or real or personal property are liable. The lien shall be of equal rank with the tax liens of the state, or any city, county, or other taxing authority within the state. The lien shall arise upon the receipt of lottery proceeds by the retailer, whether or not the retailer is at that time obligated to remit all or any portion of those proceeds to the corporation, and shall be enforceable until the liability is paid or extinguished. (d) The lien imposed by subsection (c) shall not be valid as against any purchaser, judgment lien creditor, or holder of a security interest or mechanic's lien until notice of the corporation's lien has been filed by the corporation with the county clerk of any county or counties in which the retailer's business or residence is located, or in any county in which the retailer has an interest in property. The recording of the lien shall constitute notice of both the original obligation to the corporation and all subsequent obligations to the corporation of the same retailer. Upon request, the corporation shall disclose the specific amount of liability at any given date to any interested party legally entitled to the information. (e) The lien imposed by subsection (c) shall not be valid with respect to a security interest which comes into existence after the notice of lien has been filed by reason of disbursements made within 45 days after the date the lien was filed or the date the person making the disbursements had actual notice of the lien filing, whichever is earlier, if the security interest is both of the following: (1) In property that at the time of filing is subject to the lien imposed by subsection (c), and is covered by the terms of a written agreement entered into before the lien is filed. (2) Protected under local law against a judgment lien arising as of the time of the lien filing, out of an unsecured obligation. (f) The corporation shall be afforded the same rights and remedies with respect to enforcement of any lien and collection of lottery proceeds as is afforded state, county, city, and other taxing authorities.

Section 9

Computation of Retailer's Rental Payments. If a lottery retailer's rental payments for the business premises are contractually computed, in whole or in part, on the basis of a percentage of retail sales, and such computation of retail sales is not explicitly defined to include sales of tickets in a state operated lottery, the compensation received by the lottery retailer from the lottery shall be considered the amount of the retail sale for purposes of computing the rental payment. Section 10. Verification Rules and Prizes Payments. (a) This section does not apply to a retailer. (b) The commission shall adopt rules to establish a system of verifying the validity of tickets claimed to win prizes and to effect payment of such prizes, except that: (1) No prize, nor any portion of a prize, nor any right of any person to a prize awarded is assignable. Any prize, or portion thereof, remaining unpaid at the death of a prize winner shall be paid to the estate of the deceased prize winner or to the trustee under a revocable living trust established by the deceased prize winner as settlor, provided that a copy of such a trust has been filed with the corporation along with a notarized letter of direction from the settlor and no written notice of revocation has been received by the corporation prior to the settlor's death. Following the death of such a settlor and prior to any payment to such a successor trustee, the corporation shall obtain from the trustee and each trust beneficiary a written agreement to indemnify and hold the corporation harmless with respect to any claims that may be asserted against the corporation arising from payment to or through the trust. Notwithstanding any other provision of this section, any person, pursuant to an appropriate judicial order, shall be paid the prize to which a winner is entitled. (2) No prize shall be paid arising from claimed tickets that are stolen, counterfeit, altered, fraudulent, unissued, produced or issued in error, unreadable, not received or not recorded by the corporation within applicable deadlines, lacking in captions that conform and agree with the play symbols as appropriate to the lottery game involved, or not in compliance with such additional specific rules and public or confidential validation and security tests of the corporation appropriate to the particular lottery game involved. (3) No particular prize in any lottery game shall be paid more than once, and in the event of a binding determination that more than one claimant is entitled to a particular prize, the sole remedy of such claimants is the award to each of them of an equal share in the prize. (4) A holder of a winning cash ticket from an Alabama Lottery game shall claim the prize within 365 days. A holder of a winning ticket for a multistate lottery game within 180 days, after the drawing in which the prize was won. In any Alabama Lottery game in which the player may determine instantly if he or she has won or lost, he or she shall claim a prize within 365 days, or for a multistate lottery game within 180 days, after the end of the lottery game as announced by the corporation. If a valid claim is not made for a prize within the applicable period, the prize shall constitute an unclaimed prize for purposes of subsection (c). (5) No prize shall be paid upon a ticket purchased or sold in violation of this act. Any such prize shall constitute an unclaimed prize for purposes of subsection (c). (c) Any unclaimed prize money may be retained by the corporation and added to the pool from which future prizes are to be awarded or used for special prize promotions, or may be appropriated by the Alabama Legislature directly from the corporation for any public purpose. A portion of the unclaimed prize money, not to exceed two hundred thousand dollars ($200,000) annually, shall be directed to the Alabama Department of Public Health for the treatment of compulsive gaming disorder and educational programs related to such programs. (d) Upon payment of a prize, the corporation is discharged of all liability. (e) No ticket may be purchased by and no prize may be paid to any of the following persons: (1) Any member of the board of directors, officers, or employees of the corporation. (2) Any vendor or related entity, or any member of the commission, officers, employees of, partners in, or owners of any vendor or related entity to a vendor. (3) Any spouse, child, brother, sister, or parent residing as a member of the same household in the principal place of abode of any person listed in this subsection. (f) The winner of any prize of two hundred fifty thousand dollars ($250,000) or higher may elect to remain anonymous. Section 11. Procurement Procedures. (a) The corporation shall adopt rules establishing its procurement procedures. The rules shall be designed to provide for the purchase of supplies, equipment, services, and construction items that provide the greatest long term benefit to the state, the greatest integrity for the corporation, and the best service and products, for the public. Section 12. Content of Contracts; Powers of Executive Director in Regard to Contracts. (a) Any contract executed by the corporation pursuant to this act shall specify the reasons for which any contract may be suspended, revoked, or terminated by the corporation, including, but not limited to any of the following: (1) Commission of a violation of this chapter or administrative regulations adopted pursuant thereto. (2) Failure to accurately account for lottery tickets, revenues, or prizes as required by the corporation. (3) Commission of fraud, deceit, or misrepresentation. (4) Insufficient sale of tickets. (5) Conduct prejudicial to public confidence in the lottery. (6) Any material change in any matter considered by the corporation in executing the contract with the retailer. (b) If, in the discretion of the executive director, the denial, revocation, suspension or rejection of renewal of a contract under this section is in the best interests of the lottery, the public welfare, or the State of Alabama, the executive director may suspend, revoke, or terminate, after notice and a hearing, any contract entered into pursuant to this act. A contract, however, may be temporarily suspended by the executive director without prior notice, pending any prosecution, hearing, or investigation, whether by a third party or by the executive director. A contract may be suspended, revoked, or terminated by the executive director for one or more of the reasons enumerated in subsection (b). Section 13. This act and any enabling legislation enacted by the Legislature with respect to this act supersedes and takes precedence over any other provision of law that may conflict or be inconsistent with this act or the legislation, and this act and the legislation shall operate and be construed without regard to the conflict or inconsistency. Section 14. The provisions of this act are severable. If any part of this act is declared invalid or unconstitutional, that declaration shall not affect the part which remains. Section 15. This act shall become effective immediately upon its passage and approval by the Governor or upon its otherwise becoming an act, and shall be implemented only upon ratification by the voters of Alabama of the Constitutional Amendment as contained in Senate Bill ?? of the 2019 Regular Session of the Alabama Legislature. In the event the Constitutional Amendment contained in Senate Bill ?? of the 2019 Regular Session of the Legislature is not ratified by the voters of Alabama, then this act shall become null and void.