State House revises law for small games of chance

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HARRISBURG -- Last year, the state Legislature enacted a law aimed at clarifying vague rules that govern how hundreds of Pennsylvania veterans, fraternal and social clubs raise charitable funds through what are called "small games of chance."

Act 2 of 2012 did make some improvements to the 25-year-old law, said House legislative aide Jerry Livingston, but it also upset many veterans and fraternal groups by requiring detailed financial reports to the state, which many clubs considered costly and excessive.

The act also limited -- to 30 percent -- the amount of a club's net gaming proceeds that could be used for internal operating costs. The net is what a club retains after winners are paid.

That limit was too low, club officers complained. Some said they were going to have to close their doors and stop contributing to local charities.

"Act 2 created havoc among nonprofits, veterans groups, fire companies and charity fundraisers," said Rep. Peter Daley, D-Washington, a leading critic of the 2012 law. "It was rushed to judgment and harmed countless constituents," leading 35,000 people to sign an online protest.

So the Small Games of Chance Law is being revamped again. By a solid bipartisan vote of 186-10, the state House recently approved House Bill 290, which exempts smaller clubs from having to do the annual financial reports and allows them to keep all of their gaming profits for operating expenses.

The bill still needs Senate approval before it can be sent to the governor.

The new bill defines "smaller" clubs as those with net gaming proceeds under $40,000 a year. The money can come from gambling events such as raffles; punch cards; some card games and card tournaments, including up to five Texas Hold'em tournaments a year; and "night at the races" events.

The larger fraternal groups -- those with more than $40,000 a year in net gaming profits -- can use the first $40,000 for operating expenses.

After exceeding that threshold, 30 percent of the money can go for operations -- with the remaining 70 percent to be spent on "purely public charities." Those include student scholarships, parks equipment, aid to Boy Scouts and Girl Scouts, sportsmen safety events and other "educational, philanthropic, social, health, welfare, safety and environmental" purposes.

The new bill exempts the smaller clubs from having to do background checks on their officers -- many of whom already have undergone criminal background checks as part of getting a liquor license. House Bill 290 also simplifies the fundraising and disbursement reports that must go to the state Department of Revenue each Feb. 1.

The new bill "helps a great deal of my members," said Tom Helsel, secretary of a statewide group of 500 clubs, including the Elks, Moose, Eagles, Veterans of Foreign Wars and American Legion posts. "It frees them up to use the money for things like building maintenance, utilities and new equipment."

He added, "The Revenue Department wanted a report with a week-by-week listing [of prizes] by each type of game. A lot of smaller clubs aren't computerized, and doing it manually was a logistical nightmare."

Because of an outcry from the clubs, especially those in southwestern Pennsylvania, the financial reports that were due Feb. 1 of this year had already been waived by Gov. Tom Corbett.

Mr. Daley said the new bill is meant "to free these fraternal groups from onerous and tedious mandates."

State Rep. Deberah Kula, D-Fayette, said the overwhelming margin of approval in the House "shows our commitment to these groups that play such an important role in our communities" through public service, education and environmental projects.

"It feels very good to repeal the unreasonable mandates surrounding the Small Games of Chance Law," added Rep. Ted Harhai, D-Westmoreland. "It's a major step forward."

It isn't yet known when the Senate will consider the bill.

"I urge the Senate to move with utmost urgency on this legislation, so we don't lose any more groups that have long histories of benefiting our communities," said Rep. Brandon Neuman, D-Washington.

The Small Games of Chance Law, first passed in 1987, required social and fraternal clubs to use 100 percent of their net proceeds for "charitable and public" purposes, but the wording was vague and many club officials didn't understand that the money couldn't go for club operations, Mr. Livingston said.

The new House bill also raises the limit on weekly prizes clubs can award. The 1987 law set a weekly limit of $5,000. The 2012 law increased that to $25,000, and the just-passed House bill hiked it to $35,000 a week.

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Tom Barnes: or 1-717-623-1238.


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